TOKYO: Japanese shares rebounded on Tuesday after two days of heavy selling as hopes that the Omicron coronavirus variant would not derail a global economic recovery prompted short-covering.

The Nikkei average rose 1.18% to 28,616.73, bouncing back from the 1-1/2-month low posted in the previous session, as investors drew comfort from signs that Omicron's impact might not be as grave as feared.

The index dropped 4.1% in the preceding two sessions as reports of a possibly vaccine-resistant coronavirus variant had spooked investors.

Tokyo stocks open lower after mixed US close

The broader Topix gained 1.35% to 1,974.72 climbing back above its 200-day moving average, after having slipped below that level for the first time in more than a year in the previous session.

While the World Health Organization (WHO) said the Omicron carried a very high risk of infection surges, investors bet it will be manageable.

"I am bullish on equities. Looking at US earnings, it is hard to keep selling, said Masato Kogure, group leader of execution at institutional sales at Tokai Tokyo Securities.

"Short-selling was at an extremely high level recently and it appears those positions in cash stocks are getting covered now,"

Semiconductor-related shares outperformed with MSCI Japan semiconductor index rising 3.3%.

Ibiden soared 5.0% while Advantest gained 3.7% and Sumco added 3.6%.

Battered travel-related stocks also recovered, with TSE airlines index up 2.5%. Land Transport Index , mainly made up of train operators, gained 2.4%.

Japanese precision machine makers did well with the sub-index gaining 2.3%.

Olympus rose 4.3% while Electronic microscope manufacturer JEOL jumped 7.7% to a record high.

The market is wary of selling expected at the end of trade on Tuesday from passive investors due to the latest reshuffle of MSCI indexes, in which 15 Japanese stocks will be eliminated while just two will be added.

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