October 25, 2017 / 2:52 AM / a year ago

Nikkei set for 17th day of gains on U.S. economic optimism

* Komatsu, Hitachi Construction gain after Caterpillar’s profits

* Insurers, banks in demand after U.S. yields rise

* Risk appetite up, but declining shares outweigh advancing ones

By Ayai Tomisawa

TOKYO, Oct 25 (Reuters) - Japan’s Nikkei share average rose on Wednesday morning, on track for a record 17th day of gains as bullish Wall Street underpinned sentiment, while construction equipment makers soared after Caterpillar posted robust earnings.

The Japanese market extended its unprecedented rally this week, with the victory of Prime Minister Shinzo Abe’s coalition in Sunday’s election raising the prospect of continued stimulus.

Financial stocks attracted buyers after U.S. benchmark 10-year Treasury note yields rose to their highest in more than five months on Tuesday.

The Nikkei opened 0.4 percent higher, and was up 0.2 percent at 21,845.75 in midmorning trade.

With the Dow Jones industrial average closing at a record high, and U.S. yields rising, traders said it was indicative of U.S. economic strength which lifted investor appetite for risky assets.

“As long as U.S. stocks are strong, Japanese stocks will likely follow suit,” said Hikaru Sato, a senior technical analyst at Daiwa Securities. “But there is caution against the rally and I wouldn’t be surprised if the market turns around.”

Although the market was resilient on Wednesday, declining issues outweighed advancing ones by 51 percent to 43 percent.

Construction equipment makers Komatsu Ltd and Hitachi Construction Machinery soared 3.1 percent and 0.8 percent, respectively after Caterpillar Inc blew past Wall Street’s profit and revenue estimates for the third quarter.

Insures and banks also staged a rally, with Dai-ichi Life Holdings rising 2.0 percent, Sompo Holdings gaining 1.9 percent and Mitsubishi UFJ Financial Group surging 2.8 percent.

Defensive stocks such as drugmakers, food manufacturers and utility firms were the three worst performers on the board.

Eisai dropped 1.1 percent, Ajinomoto Co shed 0.8 percent and Tokyo Gas declined 1.8 percent.

The broader Topix gained 0.2 percent to 1,759.62. (Editing by Jacqueline Wong)

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