Nikkei tops 10,000 to 8-month high, US rates weigh

* Nikkei rises above 10,000 before retreating

* Steel shares strong on ratings hike

* Worry about U.S. interest rates weighs

* Nikkei now above 52-week moving average

By Aiko Hayashi

TOKYO, June 11 (Reuters) - The Nikkei average briefly edged above 10,000 to an eight-month high on Thursday before slipping 0.1 percent on the day, with worries about rising U.S. interest rates offsetting a jump in steel shares on a brokerage upgrade.

Nippon Steel Corp (5401.T) shot up nearly 6 percent after Morgan Stanley lifted its rating on the sector to "attractive" from "in-line", saying it was time to shift to an aggressive investment stance as uncertainties surrounding the sector have started to be resolved.

But market analysts said rising U.S. interest rates weighed on investors' confidence to limit further gains as they could put a damper on consumer and business spending.

Japanese government bond prices fell on Thursday with the 10-year yield rising to its highest level since late October.

The benchmark U.S. Treasury yield climbed to an eight-month high the previous day, sending Wall Street lower as higher yields act as a benchmark for many lending rates. [US/] [.N]

"Generally speaking, the upward trend in the stock market is continuing as economic stimulus measures taken by governments around the world are still having an impact," said Takashi Kamiya, chief economist at T&D Asset Management.

"But rising U.S. rates pose a huge concern to the stock market. Higher interest rates will dampen an economic recovery and they would make bonds more attractive to investors, compared to stocks."

In active trade, the benchmark Nikkei .N225 inched down 10.16 points to 9,981.33, after rising as high as 10,022.23 in morning trade, its highest since Oct. 7 and up roughly 43 percent from its March bear market low.

The broader Topix rose 0.4 percent to 940.65.

Investors also turned cautious ahead of a U.S. government report on May retail sales due later in the day and the settlement of Nikkei futures and options on Friday.

As of Wednesday's close, the Dow Jones industrial average .DJI had risen some 35 percent and the S&P 500 .SPX some 41 percent from their March lows.