Nikkei Gains 1.1%, Hits New 10-Month High

TOKYO -- Japan's Nikkei stock index hit a new 10-month high Monday as investors took heart from a drop in the U.S. jobless rate and a better-than-expected increase in Japanese machinery orders.

The benchmark Nikkei 225 stock average rose 112.17 points, or 1.1%, to 10,524.26, the highest close since Oct. 6.

The broader Topix index gained 1.3% to 969.24.

"A surprise improvement in the July U.S. unemployment rate spurred buying. Investors were relieved as they had expected the jobless rate to get worse" than June, said Masatoshi Sato, market analyst at Mizuho Investors Securities.

The Labor Department reported Friday the U.S. unemployment rate fell to 9.4% in July, the first decline in 15 months. Also, a net total of 247,000 jobs were lost in July, the fewest in a year and a drastic improvement from the 443,000 that vanished in June, suggesting the world's largest economy is in a transition from recession to recovery.

Apart from the improving U.S. jobless data, the Nikkei index gained on a better-than-expected rise in Japan's core machinery orders, a closely watched indicator of corporate capital spending. The Cabinet Office said Monday core private sector machinery orders in June jumped 9.7% from a month earlier, better than a 3.1% rise forecast in a Kyodo news agency market survey.

While the Nikkei index rose above the 10,500-point level, Sato noted a rally in the market lost some steam toward the end of the session on disappointment over the government's estimate of an 8.6% drop in machinery orders in July-September.