TOKYO, Nov 18 (Reuters) - Japan's stock benchmark Nikkei rose on Monday on cautious optimism, underpinned by gains in global peers and prospects of a Sino-U.S. trade deal, while Z Holdings and Line Corp advanced after a formal merger announcement.
The Nikkei average gained 0.5% to 23,416.76. The broader Topix added 0.2% to 1,700.72, with defensive sectors such as pharma and telecom leading the rally, up 1.3% and 0.9%, respectively.
On Friday, Wall Street's major stock indexes closed at record levels, fuelled by fresh optimism over a potential easing of U.S.-China trade tensions and by big gains in shares of healthcare companies.
Chinese state media Xinhua said on Sunday that China and the United States had "constructive talks" on trade in a high-level phone call on Saturday, without giving details.
China and Hong Kong stocks started the week on a strong note on Monday as a cut in a key interbank lending rate on Monday stoked hopes of more stimulus measures to shore up the slowing economy.
Japan's benchmark Nikkei was flat in early morning but rose after Hong Kong shares opened firmer, later climbing more than 1%, despite clashes between anti-government protesters and police on the island, traders said.
In Tokyo, Z Holdings, formerly known as Yahoo Japan, and Line Corp gained 1.2% and 2.2%, respectively, after the two sides formally annouced a merger plan shortly before the market open to create a $30 billion tech giant.
SoftBank Corp's internet unit Z Holdings was the sixth-most traded stocks on the main board, while the messaging app firm Line became the tenth-most traded.
Semiconductor-related shares fared well after Applied Materials forecast first-quarter revenue and profit above Wall Street estimates as the U.S. chip gear maker expects more clients to upgrade their equipment ahead of the 5G rollout in key markets.
Tokyo-listed Advantest surged 3.7%, Disco Corp jumped 2.9% and Tokyo Electron rose 1.8%.
Stella Chemifa soared 6.6% on media reports that the inorganic fluorine compounds maker has obtained approval from the Japanese government to export liquid hydrogen fluoride to South Korea.
Elsewhere, Tokyo bourse's Mothers market for startups climbed 1.8% to log its biggest daily gain in two months, thanks to biopharmaceutical firm AnGes and cloud-based software provider Money Forward, up 5.4% and 4.7% respectively.
Reporting By Tomo Uetake; Editing by Jacqueline Wong & Simon Cameron-Moore