March 26, 2019 / 6:23 AM / 25 days ago

Nikkei rallies on short-covering, buying before ex-dividend

* Nintendo soars on report it plans 2 Switch console versions

* Futures bought before stocks go ex-dividend

By Ayai Tomisawa and Daniel Leussink

TOKYO, March 26 (Reuters) - Japan's Nikkei bounced from five-week lows to close sharply higher on Tuesday as cyclical stocks rose on short-covering following a sell-off the previous day driven by fears of a sharp global economic slowdown.

With the end of the business year looming on March 31 for a majority of listed Japanese companies, the market was also underpinned by investor purchases of stocks before they go ex-dividend later in the day.

The Nikkei share average ended 2.15 percent higher at 21,428.39, after recording its biggest drop since late December on Monday.

Analysts said that risk aversion eased somewhat after a slide in Wall Street had paused overnight, but concerns about a U.S. recession lingered.

On Monday, benchmark 10-year Treasury yields fell to their lowest levels since December 2017, while the yield curve between three-month bills and 10-year notes inverted further as investors continued to assess last week's dovish pivot by the U.S. Federal Reserve.

An inverted yield curve is widely seen as a signal of a recession.

"In the short-term, an inversion of U.S. yields will likely keep worrying investors," said Hikaru Sato, a senior technical analyst at Daiwa Securities. "But in the longer term, investors are concerned about Japan-specific problems such as the yen's level, which has been trading at a higher level against the dollar than last year."

He said that with Japanese companies ending their fiscal year in March, concerns about annual earnings results and forecasts for the next fiscal year will likely keep investors on edge.

Exporters rebounded, with Panasonic Corp rising 4.1 percent, Yaskawa Electric up 2.4 percent and Advantest Corp jumping 1.9 percent.

Nintendo Co surged 4.8 percent after the Wall Street Journal reported that the company plans to launch two new versions of its Switch gaming console as early as this summer, citing people familiar with the matter.

Analysts said that index futures are in demand by index and mutual funds before stocks go ex-dividend.

Renesas Electronics advanced 2.9 percent after the company said it will buy back up to 10 billion yen ($90.8 million) of its own shares.

The broader Topix rallied 2.57 percent to 1,617.94, with all of its 33 subsectors trading in positive territory. ($1 = 110.05 yen) (Reporting by Ayai Tomisawa and Daniel Leussink Editing by Shri Navaratnam and Darren Schuettler)

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