Nikkei pauses after earnings flurry, small cap stocks rise

By Ayai Tomisawa

TOKYO (Reuters) - Japan's Nikkei share average was flat on Thursday as investors searched for fresh trading opportunities after the recent flurry of earnings, while small cap stocks rose after the Tokyo bourse said it will include them in a new index.

The Nikkei <.N225> was flat at 14,340.44 in mid-morning trade, hovering around its 25-day moving average of 14,314.31. On Wednesday, the index rose 0.8 percent.

"The buying has paused for now as investors are looking for fresh macro cues," said Isao Kubo, equity strategist at Nissay Asset Management. "Within the Japanese market, major catalysts like earnings releases have been priced in."

Market analysts said that investors were also awaiting Friday's U.S. nonfarm payrolls data to further gauge when the Federal Reserve will begin winding down its $85 billion-a-month bond-buying programme -- a major driver of risk assets in recent years.

Global markets will also look to the first reading of U.S. third-quarter GDP data due out later in the day.

With nearly three quarters of Nikkei companies reporting quarterly earnings, 64 percent of them either beat or met market expectations, according to Thomson Reuters StarMine. That compared with 58 percent in the previous quarterly.

Bellwether exporters were mixed, with Toyota Motor Corp <7203.T> falling 0.8 percent after its guidance did not meet analysts' expectations, Nissan Motor Co <7201.T> rising 0.7 percent and Sony Corp <6758.T> shedding 0.4 percent.

The Topix <.TOPX> shed 0.3 percent at 1,188.13.

The dollar held its ground against the yen at 98.63, still within reach of a two-week peak of 98.86 set Friday.

Online companies such as GungHo Online Entertainment Inc <3765.T> and CyberAgent Inc <4751.T> attracted buying after they were included in a new index comprised of companies with high return on equity and strong corporate governance.

GungHo rose 1.4 percent and CyberAgent gained 2.7 percent, while J Trust Co <8508.T> and McDonald's Holdings Co <2702.T>, which were also included, added 2.5 percent and 0.7 percent, respectively.

On Wednesday, the Tokyo Stock Exchange and Nikkei Inc said they will launch a new index called JPX-Nikkei Index 400 to begin operation from the start of next year.

(Editing by Shri Navaratnam)

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