TOKYO -- The Japanese market came back to life after a three-day break as equities rocked back and forth between positive and negative territory all day.

Although various rumors about mergers and the "Love Bug" computer virus lifted selected tech and software shares, most investors stayed on the sidelines. On the minds of most was the U.S.

Federal Reserve's

meeting next week. Locally, with the earnings rush in full force over the next three weeks, many investors were waiting for further numbers before taking big positions.

The key

Nikkei 225

index fell 239.40 points, or 1.3%, to 18,199.96, while the

Topix

index, which includes all shares listed on the

Tokyo Stock Exchange's

first section, shed 6.06 to 1696.52. The

Jasdaq

small-cap index climbed 0.79 to 103.76, while the Nikkei

over-the-counter

index rose 32.39, or 1.6%, to 2118.92.

There's still a lot of hope that mutual fund managers will start buying, but traders said large-lot purchases would probably not emerge until June. That's when the fiscal 1999 earnings rush will cease, and investors will have put behind the Fed's likely 50 basis point interest rate hike next week.

Shares of

NTT

(NTT)

jumped 40,000 yen, or 2.8%, to 1.46 million after the firm announced its unit, NTT Communications, would buy a 90% stake in U.S. Web site manager

Verio

for $5.5 billion.

NTT DoCoMo

climbed 20,000 to 3.86 million as the market talked up the possibility that the mobile phone unit may merge with Holland's

KPN Telecom

, now that merger talks between KPN and Spain's

Telefonica

have broken down.

With the Love Bug and other computer viruses still roaming the globe, shares of anti-virus software-makers such as

Trend Micro

and

Vertx Link

gained ground. The former jumped 2000, or 11.7%, to 19,100, while the latter gained 100, or 18.2%, to 650.

Investors shed

Sony

(SNE) - Get Report

after

Daiwa Institute of Research

cut the firm's rating to B from A. DIR questioned whether Sony could match the market's profit expectations.

With more and more investors wary of an intervention by the European Central Bank to support the euro, Europe's single currency gained against both the dollar and the yen. This led the greenback to inch higher against the yen to around 108.75 yen.

Hong Kong's

Hang Seng

index lost 367.64 points, or 2.4%, to 14,901.00 as investors shed rate-sensitive shares such as

HSBC

(HBC)

, down HK$1.50, or 1.8%, to 84.25, and its subsidiary

Hang Seng Bank

(HSNGY)

, down 1.75, or 2.5%, to 67.50. Any rate hike in the U.S. usually pushes up Hong Kong's rates as well, since the Hong Kong dollar is pegged to the U.S. dollar.

China Telecom

(CHL) - Get Report

fell 2.25, or 3.9%, to 56.00, after the shares had risen early in the session. The market initially calculated that the company would have lower operating costs following an agreement with its parent,

China Mobile Communications,

on interprovincial connections, but a wave of profit-taking swept through to punch prices down late in the day.

Korea's

Kospi

index rose 18.95, or 2.5%, to 770.24 as foreign investors bought shares across the board. The

Ministry of Finance and Economy

said it would allow foreign companies to list on the OTC, or

Kosdaq

, market in June. Currently, foreign companies can only list shares and depository receipts on the main

Korean Stock Exchange

.