Nikkei set to rebound from Monday's steep loss; focus still on Cyprus

TOKYO, March 19 (Reuters) - Japan's Nikkei average is expected to open higher on Tuesday, rebounding from its biggest one-day percentage drop in 10 months after a proposed bailout for Cyprus raised concern about the stability of Europe's banking sector. The Nikkei is likely to trade between 12,250 and 12,450, strategists said, while Nikkei futures in Chicago closed at 12,345 on Monday, up 1.4 percent from the Osaka close of 12,170. "Stocks that dropped yesterday are expected to be in demand today," said Masayuki Doshida, a senior market analyst at Rakuten Securities. He expects investors to be buying back what they sold on Monday rather than adding new positions. The Nikkei shed 2.7 percent to 12,220.63 on Monday to a one-week low, while the broader Topix index lost 2.2 percent to 1,028.34. Overnight losses in European markets and Wall Street were not as severe as in Tokyo on Monday, which should help ease investors' concerns. Europe's FTSEurofirst 300 was down 0.3 percent and U.S. S&P 500 lost 0.6 percent. "The market will be nervously watching and it will be sensitive to news from Europe and foreign exchange movements," Doshida said. Euro zone ministers urged Cyprus to let smaller savers escape a levy on bank deposits before a parliamentary vote on Tuesday that will either secure the island's financial rescue or threaten default. Investors will also keep an eye on the U.S. Federal Reserve two-day policy-setting meeting starting later in the day and the change of leadership at the Bank of Japan this week, he said. The BOJ bought 28.7 billion yen ($302 million) worth of exchange-traded funds on Monday to support the market. The benchmark Nikkei has rallied 41 percent since mid-November after Prime Minister Shinzo Abe embarked on aggressive fiscal expansionary and monetary easing policies to reignite the long-stagnant economy.

> Wall St ends lower on angst about Cyprus bailout plan

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