Nikkei bounces from 6-month lows on strong US retail sales, weak yen

TOKYO (Reuters) - Japanese stocks rebounded from six-month lows on Tuesday morning after strong US retail sales data helped calm nerves amid the backdrop of an escalating crisis in Ukraine.

A pullback in the yen on revived risk appetite also underpinned the Nikkei share average, which rose 0.8 per cent to 14,023.46 in mid-morning trade. The index shed 0.4 per cent to 13,910.16 on Monday, the lowest closing level since Oct 8.

The improved mood in equities came after US retail sales recorded their largest gain in 1-1/2 years in March, helping Wall Street bounce off recent lows.

The Tokyo benchmark tumbled 7.3 per cent last week, hurt by a rout in US tech shares and doubts raised by Bank of Japan Governor Haruhiko Kuroda over whether the central bank will deliver fresh stimulus in the near term. It was the biggest weekly fall since the week after the March 2011 earthquake and tsunami.

Analysts said Japanese shares are enjoying a technical rebound due to their cheap valuations, but added that worries about Ukraine may check demand.

"We saw the Nikkei dipping below the 14,000-mark and it was shocking, so we may not see a big drop further, but gains may be contained amid a lack of positive catalysts," said Hiromichi Tamura, chief strategist at Nomura Securities.

Japanese shares are trading at 12.5 times their expected earnings for the year ending March 2015, while US shares trade 14.9 times their projected earnings, he said.

On Tuesday, the market benefited from buying in index heavyweight stocks like SoftBank Corp and KDDI Corp , up 3.8 per cent and 1.5 per cent, respectively.

The dollar edged up to 101.93 yen, moving away from Friday's 3-1/2-week low of 101.32 yen on the back of the solid US data.

Exporters gained ground, with Hitachi Ltd adding 2.8 per cent, while Sony Corp rose 0.9 per cent.

A weak yen lifts Japanese exporters' competitiveness abroad as well as their overseas earnings when repatriated.