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Nikkei set to rebound, strong U.S. data to end 4-day losing streak

TOKYO, Oct 4 (Reuters) - Japan's Nikkei share average is set to rise on Thursday after more data showed the U.S. economic recovery is gathering steam, but gains will likely be capped by wariness ahead of European Central Bank and Bank of Japan meetings starting later in the day.

Market players said the Nikkei was likely to trade between 8,700 and 8,850 on Thursday, with recently battered exporters granted some breathing space by a slightly softer yen, which is trading around 78.5 to the dollar.

Nikkei futures in Chicago closed at 8,790, up 0.5 percent from the close in Osaka .

"After falling for four days and a totally directionless day yesterday, the market is due for a rebound and the U.S. data will be the catalyst," said Toshiyuki Kanayama, senior market analyst at Monex.

Growth in the U.S. services sector picked up in September, contrary to economists' expectations of a slight decrease, while the private sector added more jobs than anticipated last month.

Yet trading may remain restrained in a week so far characterised by very low volumes, ahead of the closely watched U.S. non-farm payrolls report on Friday, when the Bank of Japan's policy meeting also concludes.

Market consensus is mixed over whether the BOJ will ease monetary policy further, as it may be reluctant to expand its balance sheet after swelling it by 10 trillion yen ($127 billion) last month, although its latest survey showed increasing pessimism about the domestic economy.

The Nikkei ended down for a fourth straight session on Wednesday, losing 0.5 percent to 8,746.87 to a four-week closing low.

"The troughs over the last five months have been gradually getting higher so it's very important it doesn't hit its September 3 low of 8,646," said Kanayama.

The benchmark stooped to 8,238.96 on June 4, and then fell to 8,328.02 on July 25 after another brief rally. Another rebound and pullback left it at 8,646.03 on Sept. 6.

The index is expected to close up 12 percent on the year at about 9,500, according to 22 analysts and fund managers polled by Reuters. The index is currently up 3.4 percent for the year.

> Wall St stays afloat on firm data but HP drags

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> Oil falls as global economic data dims demand outlook

STOCKS TO WATCH - LAWSON INC

Lawson, Japan's second-biggest convenience store operator, said its operating profit in the half-year ended on Aug. 31 rose 6.1 percent on the year, reaching 34.6 billion yen ($441 million), or 52 percent of its full-year operating forecast of 66 billion yen.

-KDDI CORP

KDDI Corp is set to break Softbank Corp's

monopoly in Japan on Apple Inc's

iPad, the Nikkei business daily reported, saying that the mobile phone provider is in the final stages of talks to sell the newest version of the tablet due out as early as next month. KDDI is also the only mobile provider apart from Softbank to provide the iPhone in Japan.

($1 = 78.5300 Japanese yen)

(Reporting by Sophie Knight; Editing by Edmund Klamann)

((sophie.knight@thomsonreuters.com)(+81 3 6441 1833)(Reuters Messaging:)(sophie.knight.thomsonreuters.com@reuters.net))

Keywords: MARKETS JAPAN STOCKS/

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