Nikkei retreats from 3-month high but defense stocks jump

* Retail investors seen buying defense shares

* Kura tumbles after quarterly profit disappoints

TOKYO, March 6 (Reuters) - Japan’s Nikkei retreated from three-month highs after weak U.S. shares soured investor sentiment, but defense-related companies jumped on reports that North Korea has restored part of a missile launch site.

The Nikkei share average shed 0.6 percent to 21,604.61 in midmorning trade, with support seen at its 25-day moving average of 21,176.28.

The Nikkei has traded at a three-month high earlier this week, but analysts say investors are now taking profit in the absence of any fresh catalysts to buy.

Concerns over U.S.-China trade issues have persisted after U.S. Secretary of State Mike Pompeo said President Donald Trump would reject a trade deal that was not perfect, but the United States would still keep working on an agreement.

“The market’s mood has been up and down based on developments in trade talks, but now most people are tired of chasing headlines,” said Yutaka Miura, a senior technical analyst at Mizuho Securities.

“Stocks have recovered on a weak yen and a surge in U.S. stocks, but the market may take a pause for now.”

Index-heavy stocks were sold, with Fast Retailing falling 2.7 percent, SoftBank Group shedding 0.7 percent while FamilyMart Uny shedding 1.6 percent.

Conversely, defense stocks were in the spotlight with retail investors pushing them higher after South Korea’s Yonhap News Agency and two U.S. think tanks reported that North Korea has restored part of a missile launch site it had previously started dismantling.

Defense equipment manufacturer Ishikawa Seisakusho jumped 17 percent, firearms maker Howa Machinery surged 7.3 percent and Hosoya Pyro-Engineering, which sells pyrotechnics, soared 14 percent.

Kura Corp tumbled 8 percent after the sushi restaurant chain reported a 29 percent drop in its November-January net profit, hit by mounting costs related to opening overseas outlets.

The broader Topix declined 0.3 percent to 1,615.14. Declining issues outnumbered advancing ones 1,300 to 716. (Editing by Sam Holmes)