Nikkei grapples in bear market territory after rout

* Nikkei gains 0.5 pct by break after previous day's 5 pctdrop

* Benchmark index helped by short covering

* Toyota, Sony, Keyence rise; Fast Retailing, SoftBank fall

TOKYO, Dec 26 (Reuters) - Japan's Nikkei rebounded slightlyon Wednesday, helped by short-covering, but struggled to stayafloat after plummeting into bear market territory the previousday.

The Nikkei share average .n225 rose 0.45 percent to finishthe morning session at 19,241.87, barely shaking off the 5.01plunge of the previous session - the steepest single-day declinein over two years.

The searing sell-off has left the benchmark down about 21percent from a 27-year peak scaled in early October, meaningit's still in bear market territory entered during the previoussession.

The broader Topix .TOPX was 0.88 percent higher at1,427.94, but down 25.5 percent from a high of 1,911.31 hit inlate January.

The stock market woes weren't confined to Japan. WallStreet had a torrid day on Christmas eve, leaving global equitymarkets heading into the year-end under a heavy cloud asconcerns over world growth and U.S. political uncertaintyjangled investor nerves.

A U.S. federal government shutdown and President DonaldTrump's increasingly hostile stance towards the Federal ReserveChairman, Jerome Powell, kept investors well clear of riskierassets.

"For short-term sentiment to improve, it's necessary forDemocrats and Republicans to agree on the budget so that thegovernment shutdown will be lifted," said Yutaka Miura, chieftechnical analyst at Mizuho Securities.

"I think there is a possibility selling (in Japanese stocks)will resume after rebounding once because the uncertainty hasn'tbeen resolved completely yet."

The Nikkei was helped by short covering, Miura said.

Shares of some index heavyweights rebounded on Wednesday,with Toyota Motor Co 7203.T rising 0.4 percent, Sony Corp6758.T and Nintendo7974.T both adding 1.5 percent, andfactory automation maker Keyence up 1.8 percent.

Other index heavyweights fell, however, with Fast Retailing9983.T down 0.8 percent and SoftBank Group9984.T giving up1.4 percent.

Exporters got a small boost as the yen moved somewhat off afour-month high against the dollar reached overnight afterJapan's top currency official said Tokyo stands ready to takenecessary steps if the market becomes too erratic.

Electronics manufacturer Panasonic6752.T gained 1.7percent while construction machinery maker Komatsu6301.T advanced 0.8 percent and factory robot maker Fanuc Ltd6954.T tacked on 1.1 percent.

All but four of the Tokyo Stock Exchange's 33 subsectorswere in positive territory, led by precision machinery .IPRCS.T and air transport .IAIRL.T .

(Reporting by Daniel LeussinkEditing by Shri Navaratnam) ((; Twitter: @danielleussink;+81-3-6441-1825; Reuters

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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