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Nikkei rises to 1-week high ahead of BOJ, U.S. jobs data

* BOJ expected to stand pat

* Seven & I suffers as weaker supermarket sales hurt

By Dominic Lau

TOKYO, Oct 5 (Reuters) - Japan's Nikkei average hit a one-week high on Friday, lifted by gains in some battered cyclical stocks, ahead of the outcome of a Bank of Japan policy meeting and key U.S. jobs data.

By the midday break, the Nikkei

advanced 0.4 percent to 8,861.95, just below i ts 75-day moving average at 8,873.24.

The index rose 0.9 percent on Thursday, snapping a four-day losing run, as sentiment was boosted by a strong showing by the pro-business U.S. Republican candidate, Mitt Romney, in his first debate with President Barack Obama, dealers said.

"The market is still very volatile. The real estates were a good sector yesterday. They are not so good today. Within the market, the sector movement is quite sharp and temporary," a senior trader at a foreign bank said.

The real estate sector was flat after rising 2.8 percent on Thursday, while shippers rose 2.2 percent, although they are still down 27.6 percent this year.

Toyota Motor Corp

shed 1.1 percent after a source with knowledge of the matter said its sales in China fell about 40 percent in September from a year earlier to about 50,000 cars, and the decline will likely force the company to miss its goal of selling 1 million cars there this year.

But other foreign brands such as BMW

and Daimler's

Mercedes-Benz enjoyed higher sales in China last month.

Toyota's Japanese peer, Nissan Motor Co

, which has a larger exposure to China than Toyota, lost 1.3 percent. Overnight, the S&P 500

extended gains to a fourth day, putting it on the cusp of a new five-year high if Friday's jobs report shows encouraging signs for the labour market.

Economists in a Reuters survey forecast 113,000 jobs were created in September compared with 96,000 jobs in August, while the unemployment rate is seen at 8.2 percent, versus 8.1 percent in August.

Another trader said the market was likely to take a positive view on the nonfarm payrolls data, the second last before the U.S. presidential election, whether it was good or bad.

He said if it came in above expectations, it would give some relief to the market on the basis that the U.S. labour market is improving, while if the figure disappointed, it could strengthen Romney's bid for presidency.

But before that, the BOJ is expected to keep monetary settings unchanged to spend some time reviewing the effect of its policy loosening last month. Weakening manufacturing activity in Asia, however, continues to cloud the outlook.

RETAILERS MIXED Seven & I Holdings Co

lost 3 percent after its quarterly profit fell 2.5 percent as weaker sales at its supermarkets offset growth from its convenience stores, leading Japan's top general retailer to pare its annual outlook.

But Ryohin Keikaku Co Ltd

, the operator of "Muji" brand retail chains, climbed 2.8 percent after it raised its operating profit forecast for the year ending February 2013 on the back of solid first-half earnings.

The quarterly earnings season will move into high gear in the next two to three weeks. Investors were disappointed with the previous quarterly earnings, when 54 percent of Nikkei companies reported results below analysts' expectations.

For this quarter's results, SmartEstimates from Thomson Reuters StarMine expects an average negative earnings surprise of 1.2 percent.

"What I expect to see is that expectations for the second half (of Japan's fiscal year ending March 2013) will be cut just as the global conditions start to thaw," said Nicholas Smith, Japan strategist at CLSA.

Nikon Corp

shed 5.2 percent, extending Thursday's 3.6 percent drop after the Nikkei newspaper said its interim operating profit would drop 43 percent on the year to 35 billion yen ($446 million), signalling a slowdown in sales.

The broader Topix

index added 0.2 percent to 736.97 in light trade, w ith 41 percent of its full daily average for the past 90 days.

The benchmark Nikkei is up 4.8 percent so far this year, trailing a 16.2 percent rise in the S&P 500 and an 11 percent gain in the pan-European STOXX Europe 600

index. ($1 = 78.4500 Japanese yen) (Editing by Richard Pullin)

((dominic.lau@thomsonreuters.com)(+81 3 6441 1917)(Reuters Messaging:)(dominic.lau.thomsonreuters.com@reuters.net))

Keywords: MARKETS JAPAN STOCKS/