Japan's Nikkei average edged higher on Wednesday, taking comfort from US stocks' rise to five-month high, though gains were capped ahead of key events in Europe as the region battles its debt crisis.
Spain and Italy, now at the forefront of the euro zone debt turmoil, will test investor appetite with bond auctions this week, while the European Central Bank is due to hold a rate-setting meeting.
Nomura Holdings, Japan's largest brokerage, was the top percentage gainer on Tokyo's core 30 bluechip index. The stock rose 3.2% to a one-month high after the company's highest-ranking ex-Lehman Brothers executive resigned amid heavy losses in its core investment banking division.
Market players said the share price move was partly due to short-covering following heavy losses last year, but some traders voiced expectations for management changes to help return the brokerage back profitability.
Banks gained, tracking an overnight bounce in US financials. Sumitomo Mitsui Financial Group, Mizuho Financial Group and Mitsubishi UFJ Financial Group rose between 0.9 and 1.9%.
The Nikkei gained 0.3% to 8,447.88, but stayed below its 25-day moving average near 8,494. The broader Topix added 0.2% to 733.47.
"There is a slightly emerging feeling that the US is on something a little more sustainable than just a year-end pick-up," said Stefan Worrall, director of equity at Credit Suisse in Tokyo.
"Many in the market are skeptical and more cautious to recognize this, but it gives some people nascent hope."
Recent economic data from the United States points to a healthier recovery in the world's largest economy, easing concerns about a global slowdown.
In Japan, banking and construction sectors have seen solid gains so far this year.
The Topix banking index has added 2.6% and the construction index has gained 3.4% since the start of the year, versus a 0.7% rise in the Topix.
In terms of valuations, the banking sector offered a steeper discount. It carried a 12-month forward price-to-earnings ratio of 7.5, much cheaper than the Topix's 11.4 and the construction sector's 11.6, data from Thomson Reuters Datastream showed.
The earnings momentum -- analysts' upgrades minus downgrades as a precentage of total estimates -- of both the banking and construction sectors has deteriorated, but that of banks remained positive, signalling a relatively better outlook.
The banking sector's earnings momentum was 1.8%, down from 9.2% a month earlier, while that of the construction sector was minus 2%, dropping from 4.8% the previous month, Datastream data showed.
