Nikkei rises 0.8 pct on U.S. hope, Shinsei jumps

                                
 * Shinsei Bank, Aozora Bank shares soar on merger news
                                
 * Chugai shoots up on hope for flu drug amid swine flu fears
                                
 * Flu worries weigh on overall market confidence
                                
 By Aiko Hayashi
                                
 TOKYO, April 27 (Reuters) - Japan's Nikkei average rose 0.8
percent on Monday, buoyed by Shinsei Bank <8303.T> on news of its
merger talks with Aozora Bank <8304.T>, while Chugai
Pharmaceutical <4519.T> jumped on hopes for its flu drug as
worries grew about an outbreak of swine flu.
                                
 Analysts said fears of a global flu pandemic helped dampen
overall investor confidence, with new infections confirmed in the
United States and Canada on Sunday, and millions of Mexicans
staying indoors to avoid a virus that has already killed around
80 people. [ID:nN26482522]
                                
 U.S. stocks gained on Friday on optimism about the U.S.
economy but stock futures <SPc1> fell more than 1 percent by
early Monday morning, limiting further gains.
                                
 "Better-than-expected results by some U.S. companies and
receding fears about the global financial system are helping the
Tokyo market," said Hiroaki Kuramochi, chief equity marketing
officer at Tokai Tokyo Securities.
                                
 "But worries about swine flu are weighing on market sentiment
as it may require governments to come up with steps to tackle it,
on top of economic measures. What's worrisome is that infections
seem to have spread not only in Mexico but in the U.S. and
Europe," he said.
                                
 The benchmark Nikkei <.N225> added 68.64 points to 8,776.63,
after earlier climbing as much as 1.5 percent. It fell 1.6
percent on Friday and shed 2.2 percent on the week.
                                
 The broader Topix <.TOPIX> gained 1.1 percent to 838.93.
                                
 In the United States, American Express <AXP.N> shares surged
on Friday after reporting results that topped analysts'
expectations.
                                
 Ford Motor <F.N> posted a smaller-than-expected first-quarter
loss and said it was on track to at least break even in 2011 and
it did not expect to seek U.S. government loans. [ID:nN24400235]
                                
 SHINSEI, AOZORA SURGE
                                
 Shares of Shinsei Bank surged 12.9 percent to 140 yen, while
Aozora Bank shot up 16.1 percent to 137 yen, after people
familiar with the matter said on Saturday the two are in talks to
merge and create Japan's sixth-largest bank. [ID:nBNG449002]
                                
 "An industry realignment becomes a trend when the economy is
bad. Both banks had been looking for a partner as it had become
difficult to stand alone," said Takahiko Murai, general manager
of equities at Nozomi Securities.
                                
 In a move that would create the world's third-largest
chipmaker, the Nikkei business daily reported on Friday that NEC
Electronics Corp <6723.T> and Renesas Technology have struck a
basic agreement to merge around next April. [ID:nBNG386105]
                                
 Sumitomo Mitsui Financial Group (SMFG) <8316.T> gained 2.6
percent to 3,170 yen after sources said the bank had gained
exclusive negotiating rights to buy Citigroup Inc's <C.N> retail
brokerage and part of its investment banking operations in Japan.
[ID:nT347304]
                                
 Stocks linked to worries about swine flu stood out.
                                
 Chugai, which distributes flu drug Tamiflu through its
partnership with developer Roche <ROG.VX>, soared 14.1 percent to
1,846 yen to become the top positive contributor to the Nikkei
225.
                                
 Fujibo Holdings <3104.T>, a manufacturer of cotton, synthetic
and wool products, including medical masks, jumped 10.7 percent
to 93 yen after the swine flu outbreak.
                                
 But stocks in travel-related businesses fell, with Japan
Airlines <9205.T> shedding 2.5 percent to 194 yen and All Nippon
Airways <9202.T> sliding 3.3 percent to 354 yen.
                                
 Discount airline ticket seller H.I.S <9603.T> lost 9.2
percent to 1,577 yen.
                                
 Trade was light on the Tokyo exchange's first section, with
963 million shares changing hands, compared with last week's
morning average of 1.2 billion.
                                
 Advancing stocks outnumbered declining ones by more than 2 to
1.
  (Editing by Joseph Radford)