TOKYO Japan's Nikkei share average bounded up on Monday morning after better-than-expected U.S. jobs data eased fears of a slowdown in the U.S. economy, while strong earnings for Toyota Motor Co (7203.T) reassured investors amid a poor earnings season.
Other automakers such as Honda Motor Co (7267.T) and Mazda Motor Corp (7201.T) also fared well from a softer yen, with demand for the safe-haven currency falling on Friday amid a risk rally as data showed U.S. employers hired the most workers in five months in July.
The Nikkei .N225 rose 1.7 percent to 8,702.34, stopping short of strong resistance around 8,741, its 25-day moving average.
"Risk aversion is lifting but the gains we're seeing are mostly driven by short-covering and exporters are still largely in a bad way, as the earnings showed," said Yoshihiro Ito, chief strategist at Okasan Online Securities.
Sharp Corp's (6753.T) woes continued as it shed 4.2 percent, extending Friday's 28 percent dive after the company shocked investors by revising its full-year outlook to a massive operating loss.
Taiwanese company Hon Hai Precision Industry (2317.TW) also said on Friday that Sharp had agreed Hon Hai did not need to honor a March agreement to invest in Sharp "due to the volatility of the share price".
However, investors returned to buy some companies that were punished for poor earnings or guidance, propping up the market.
Komatsu Ltd (6301.T) gained 1.5 percent after slumping 8.1 percent last week to hit a 9-1/2 month low following a cut of 17 percent in the construction machine maker's full-year operating profit forecast.
Likewise Honda, which fell 5.7 percent on Wednesday after investors were disappointed with its U.S. quarterly sales, recovered 2.7 percent, helped by the softer yen.
TOYOTA EARNINGS CHEER
Toyota rose 2.5 percent after posting its largest quarterly operating profit for four years in April-to-June, while the company hiked its full-year sales target on strong U.S. and domestic demand.
JPMorgan reiterated its "overweight" rating for the stock and said in a note: "We believe there is considerable medium-term scope for margin gains, driven by North America, starting from a low base, and by brisk business in emerging economies."
Gains for economically sensitive sectors were evidence of stronger risk appetite, which was blunted last week after a lack of immediate action from the European Central Bank and a host of poor earnings from several blue-chips.
The Topix's mining subsector .IMING.T and securities subsector .ISECU.T put on 4.6 and 2.8 percent respectively, but investors were still wary.
"The uncertainty and negative factors that hurt stocks last week are still lurking, so I think that gains will be limited," said Hideyuki Fukunaga, CEO at Investrust.
Market players are now eyeing a raft of important Chinese data and the conclusion of a Bank of Japan policy meeting, both due on Thursday.
"If the Chinese data comes out positive then we might see a reversal of the losses suffered last week after all the central banks disappointed by not introducing further easing," Fukunaga said.
The broader Topix .TOPX rose 1.4 percent to 733.93, turning positive on the year again after slipping to 0.6 percent down on the year on Friday. Trade was moderate on the main board, with volume at 42.6 percent of its 90-day full-day average.
The Nikkei is now 2.9 percent up on 2011, while the Topix is just 0.7 percent up on the year, as investor confidence has been rocked by the euro-zone crisis and concern about slowing growth in the U.S. and China.
(Editing by Richard Pullin)