* Olympus jumps after two brokerages raise their stock ratings
* Cyclical stocks outperform
By Ayai Tomisawa
TOKYO, Jan 8 (Reuters) - Japan's Nikkei extended gains on Tuesday, tracking Wall Street on hopes that U.S.-Chinese talks in Beijing would reduce trade tensions, with a weaker yen lifting exporters.
The Nikkei share average rose 0.8 percent to 20,199.79 at the midday break, comfortably sitting above the psychologically important line of 20,000.
Fears of a global slowdown have led to a sharp pullback in markets over the last two weeks, sending the Nikkei as low as 18948.58 on Dec. 26, its lowest since April 2017.
China has the "good faith" to work with the United States to resolve trade frictions, China's Foreign Ministry said, while U.S. Commerce Secretary Wilbur Ross said he saw "a very good chance that we will get a reasonable settlement" as the two countries started their first face-to-face talks since a 90-day truce was agreed in December.
"There are still global risks such as the trade dispute and issues regarding Brexit which will probably take a while to resolve," said Hikaru Sato, a senior technical analyst at Daiwa Securities. "But as some stocks are sold heavily and remain cheap, investors are buying them on the dips."
Cyclical stocks such as shippers, machinery and automakers were in demand. Mitsui OSK Lines advanced 2.6 percent, Kawasaki Kisen 3.4 percent, industrial machinery maker Fanuc Corp 3.2 percent and Honda Motor Co 3 percent.
Olympus Corp jumped 7.6 percent after Morgan Stanley upgraded the stock's rating to 'overweight' from 'equal-weight,' citing expectations for earnings growth from new products in the mainstay GI endoscope segment, while UBS Securities also raised its rating to 'buy' from 'neutral.'
Nissan Motor Co was in focus as its ousted Chairman Carlos Ghosn defended himself against allegations of financial misconduct in a Tokyo court on Tuesday, declaring his innocence in a first public appearance since his arrest in November. Nissan shares were up 0.1 percent at the midday break.
The broader Topix rose 0.5 percent to 1,520.08.
Editing by Simon Cameron-Moore