Nikkei rises on tech gains; Sony jumps on buyback, Microsoft tie-up

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* Nikkei up 1.59%, could post small weekly gains

* Sony jumps 10% on share buyback, Microsoft partnership

* Communication equipment makers gain on rally in U.S. peers

By Hideyuki Sano

TOKYO, May 17 (Reuters) - Japan's Nikkei share averagejumped on Friday and looked set to end the week with a slightgain, led by rallies in Sony6758.T and technology shares,though concerns about U.S.-China tensions kept many investorscautious.

The Nikkei rose 1.56% to 21,391 points by midday. For theweek, it was on track to add 0.2 percent.

The broader Topix .TOPX rose 1.59% to 1,561.94, up 0.8% sofar this week.

The rally was led by electric machinery .IELEC.T andprecision machinery makers .IPRCS.T , which both rose more than2%.

Sony6758.T jumped 9.9% after it announced a share buybackand strategic partnership with Microsoft CorpMSFT.O on areassuch as streaming games, media and new image sensors. urn:newsml:reuters.com:*:nT9N21201Xurn:newsml:reuters.com:*:nL2N22S0GY

Softbank Group9984.T , a major investor in a whole gamutof U.S. tech firms, gained 3.9%.

Some communication equipment manufacturers rose after upbeatearnings boosted CiscoCSCO.O 6.6%, helping to drive up theNasdaq Telecommunication index .IXUT 4.2%, the second biggestgain in the past four years.

Some market players suspect those shares were helped byspeculation of possible windfalls from Washington's tough stanceon China'sHuawei, their strongest rival.

NEC 6701.T rose 3.1% while Fujitsu6702.T gained 1.7%. On the other hand, Murata Manufacturing6981.T , a Huaweisupplier, extended losses, falling 0.6%. Murata has plunged 19%so far this month.

"I think Japanese share markets will remain capped for now,given the perception that (they) will be susceptible to foreigndemand and vulnerable to trade tensions," said Hiroyuki Ueno,senior strategist at Sumitomo Mitsui Trust Asset Management.

Investors also looked to Japan's GDP data due on Monday,which is expected to show the country's economy contracted inthe first three months of this year and could prod thegovernment to delay a sales tax hike slated for October.

Japanese corporate earnings have been weaker thanexpectations as the economy has stagnated.

A case in point was brokerage shares index .ISECU.T , whichhit its lowest level since August 2016 before recovering topositive territory.

Industry leader Nomura Holdings8604.T also hitnear-three-year low and last stood up 0.1 percent. (Editing by Kim Coghill) ((hideyuki.sano@thomsonreuters.com; +81 3 6441 1827; ReutersMessaging: hideyuki.sano.thomsonreuters.com@reuters.net))

This article appears in: Stocks , World Markets , Politics

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