Nikkei hits 10-yr high as data boosts economy hopes

                                
 * Nikkei jumps to highest since Oct 6, breaks 10,500
                                
 * Buoyed by better than expected U.S. and Japanese data
                                
 * M'bishi Chemical jumps on report it to buy M'bishi Rayon
                                
 By Elaine Lies
                                
 TOKYO, Aug 10 (Reuters) - Japan's Nikkei stock average
climbed to a 10-month high on Monday after better-than-expected
Japanese and U.S. data underpinned hopes that both economies are
on the mend, with exporters also gaining on a weaker yen.
Shares of Mitsubishi Chemical Holdings <4188.T>, Japan's
largest chemical firm, surged 5.2 percent after the Nikkei
business daily said it is in talks to acquire resin maker
Mitsubishi Rayon <3404.T> in a deal worth up to 200 billion yen
($2.1 billion). [ID:nT228165]
                                
 Mitsubishi Rayon soared 20.9 percent.
                                
 Japanese machinery orders, a leading indicator of capital
spending, rose in June for the first time in four months, but
Japanese manufacturers forecast a sixth straight quarterly fall
in machinery orders in July-September.
                                
 The data came on the heels of a drop in the U.S. unemployment
rate in July, the first in 15 months as employers cut
fewer-than-expected jobs. [ID:nT158527] [ID:nN07385157]
                                
 "Machinery orders were quite a lot better than expected and
if you put this together with the U.S. jobs data, this will
really give the market a boost," said Noritsugu Hirakawa, a
strategist at Okasan Securities.
                                
 "The market was cheered by a solid series of earnings, but we
needed proof of macroeconomic recovery to really push higher, and
now we're starting to get that."
                                
 The benchmark Nikkei <.N225> rose 1.4 percent or 147.90
points to 10,599.99 after earlier climbing as far as 10,585.37,
its highest since Oct. 6. The broader Topix <.TOPX> gained 1.6
percent to 971.62.
                                
 With the Nikkei breaking 10,500, analysts said its next
target is likely to be 10,800 -- a level it last saw in October
and a 50 percent Fibonacci retracement from its June 2008 high
and last October's 26-year low just under 7,000.
                                
 But some in the market warned that further gains would be
inhibited for now by concerns about the economy's performance in
the current quarter.
Japan's core machinery orders rose a bigger-than-expected 9.7
percent in June, but it was unclear whether the rise marked a
lasting recovery in capital spending.
                                
 "We really need to start getting some positive macroeconomic
outlooks for this quarter and then the latter half of the year,
and I think market attention is turning to this," said Masayoshi
Okamoto, head of dealing at Jujiya Securities.
"If people were really confident we'd be rapidly heading up
to 11,000 or 12,000. As it is, 10,700 looks tough for now."
CHEMICAL CONSOLIDATION
 Mitsubishi Chemicals rose to 445 yen after the Nikkei
report, which also said the two companies are likely to agree on
a deal as early as this autumn and plan to complete the
transaction in spring next year.
                                
 Mitsubishi Rayon rose 20.9 percent to 330 yen. The two
companies do not currently have capital ties.
                                
 "This report, if it turns out to be true, could well spark a
round of consolidation in the chemical industry," said Okasan's
Hirakawa.
                                
 Machinery makers rose after the data, with Hitachi
Construction Machinery Co <6305.T> gaining 3 percent to 1,765 yen
and Komatsu Ltd <6301.T>, the world's second-largest maker of
construction machinery, up 3 percent at 1,634 yen.
                                
 Exporters got an extra boost from a weaker yen, with the U.S.
dollar fetching around 97.19 yen <JPY=>-- down 0.4 percent but
still retaining broad gains made on Friday after the U.S. jobs
data.
                                
 Honda Motor Corp <7267.T> gained 3.9 percent to 3,220 yen,
Canon Inc <7751.T> rose 2.6 percent to 3,500 yen and Sony Corp
<6758.T> rose 3.3 percent to 2,785 yen.
                                
 Rohm <6963.T>, a speciality chip maker, climbed 3.6 percent
to 6,880 yen after it forecast a narrower loss for the six months
to September, citing cost cuts and better-than-expected demand
for flat TVs.
                                
 Trade picked up on the Tokyo exchange's first section, with
987 million shares changing hands, compared with last week's
morning average of 962 million.
                                
  Advancing stocks outnumbered declining ones by more than 3
to 1.
 (Reporting by Elaine Lies; Editing by Edwina Gibbs and Joseph
Radford)