Japan's Nikkei average rose 1.6 percent to snap a four-day losing streak on Thursday, with upbeat reports on profits at Honda Motor and Sony Corp adding to momentum from strong earnings at other big name stocks such as Canon.
But Toyota Motor Corp slid on concerns about its suspension of U.S. sales of key car models, while Nippon Steel fell after halving its full-year profit forecast to below the market consensus.
Short-covering emerged after U.S. President Barack Obama's State of the Union address, mainly on relief that he did not lay out more details for a recent proposal to limit bank risk-taking, a plan that spooked global financial markets last week.
Market sentiment gained further support from the Federal Reserve's more upbeat reading of the economy. Analysts said the Nikkei was also ripe for a rebound after it shed more than 5 percent in its four-day losing streak to Wednesday.
"There was a lot of caution this week about the Fed and about Obama's speech, but the Fed reassured markets yesterday and then investors were further relieved that Obama didn't give any more details on his financial regulation plan," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
"But the Nikkei's at a difficult level — we're still down below where we ended last year and a lot depends on earnings. Certainly people are looking at upward earnings momentum but it's still mainly expectation."
A slew of firms announced results after the close, including Nintendo Co Ltd, which posted a 41 percent fall in nine-month profit as sales of its DS handheld game player slowed and Elpida Memory which reported its first net profit in nine quarters.
Advantest Corp, which supplies chip testers to chip makers such as Intel and Samsung, said it now expects a annual net loss of 13.5 billion yen, bigger than the market consensus.
The benchmark Nikkei rose 162.21 points to 10,414.29 after earlier rising more than 2 percent to 10,462.70. The broader Topix rose 0.7 percent to 914.32.
"Investors are welcoming an upward momentum in exporters' profits on the back of a recovery in exports, a trend which has finally become more apparent," said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.
"But caution will be necessary going forward as investor focus will likely shift to improvements in earnings in absolute terms."
BAD NEWS, GOOD NEWS
Investors shunned shares with poor results, while those that did well — or were expected to do well — forged higher.
Nippon Steel halved its full-year profit on sluggish demand and prices for construction-use steel and higher raw materials costs, pushing its stock down 3.8 percent.
One market player said the negative surprise had weighed on the overall market.
"The Nikkei might have moved up as high as 10,500, but the Nippon Steel results definitely chilled the mood a bit," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.
Hitachi Construction tumbled 7.6 percent to 2,034 yen after the company forecast annual operating profit to fall 51 percent from the previous year, though this was roughly in line with analysts' forecasts.
But Sony gained 4.9 percent to 3,085 yen after the Nikkei newspaper said the electronics giant's operating profit for the October-December quarter was boosted by a recovery in its video game and LCD TV operations.
Honda Motor Co climbed 3.3 percent to 3,140 yen after a newspaper reported the automaker's operating profit for the October-December quarter was roughly twice that of the previous quarter.
But Canon advanced 1.8 percent to 3,680 yen after the world's largest digital camera maker ahead of Sony said it expected its operating profit to jump 52 percent to 330 billion yen ($3.7 billion) in 2010.
Toyota, though, shed 3.9 percent to 3,560 yen.
About 2.4 billion worth of shares traded on the Tokyo exchange's first section, compared with seven-month highs above 3 billion shares logged earlier this month.
Advancing shares outnumbered declining ones by more than 2 to 1.
