Nikkei up on U.S.-China trade talk optimism; Daiichi Sankyo jumps

Ayai Tomisawa

* Trade talk optimism boosts shippers, machine makers

* Nikkei up 6.0 pct gain for quarter

* Drugmaker Daiichi Sankyo grabs spotlight with 16 pct gain

* New royal era could boost tourism-related stocks

TOKYO, March 29 (Reuters) - Japan's Nikkei rose on Friday on optimism about the latest round of U.S.-China trade talks, with cyclical sectors such as shipping and machinery advancing on the last day of the Japanese fiscal year.

Daiichi Sankyo Co grabbed the spotlight with a 16 percent jump to a daily-limit and record high of 5,100 yen. The drugmaker is joining forces with AstraZeneca Plc to develop and sell a Daiichi cancer drug.

The Nikkei share average rose 0.82 percent to 21,205.81. It fell 0.8 percent for the month, but gained 6.0 percent for the quarter.

Machinery and shipping stocks steamed ahead, with Kawasaki Kisen up 2.3 percent and Yaskawa Electric surging 2.4 percent.

Worries about global economic growth have rattled markets since the U.S. Federal Reserve abandoned projections for any interest rate hikes this year, and the U.S. Treasury yield curve inverted for the first time since 2007.

"The Nikkei has been trading in a range bound recently and it may continue to stay that way for a while for two reasons," said Shogo Maekawa, a global market strategist at JPMorgan Asset Management.

Cyclical stocks such as industrial and machinery firms have rebounded from December lows and will likely remain in favor on hopes that China will step up measures to shore up the economy, likely giving the manufacturing sector a fillip.

On the other hand, concerns about a U.S. economic slowdown will likely limit the market's upside.

"If bad indicators from the U.S. show weakness in the housing market or consumption in the next few weeks, the market will be pressured," Maekawa said, adding he expected the Nikkei to stay between 20,500 and 21,500 as investors focused on U.S.-China trade issues.

U.S. officials are in Beijing for a fresh round of trade talks on Friday, to be followed by discussions in Washington next week between the world's two largest economies.

Looking ahead, tourism-related stocks could get a boost from next week as preparations get underway for Crown Prince Naruhito's reign due to begin on May 1.

The direct market impact is likely to be limited, but positive sentiment from the official naming of the new era, and the declaration of an unprecedented 10-day public holiday, may energize retail investors, some analysts said.

"We may not only see the mood to be festive, but see some stocks gaining on rising expenditure during the 10-day Golden Week holidays," said Takuya Takahashi, a strategist at Daiwa Securities.

The "Golden Week" holiday will run from late April to early May.

"Travel agency stocks as well as rail road operators, hotel operators and airline stocks may be bought when we have more news about rising tourism demand," Takahashi said.

The broader Topix rose 0.56 percent to 1,591.64. (Editing by Kim Coghill and Darren Schuettler)