Nikkei likely to tread water near 9,800

TOKYO, July 6 (Reuters) - Japan's Nikkei stock average is
likely to drift sideways on Monday, with investors seen lacking
the conviction to push shares higher after the Nikkei's surge to
an eight-month peak last month.

One stock to watch may be Toyota Motor Corp after the Nikkei
business daily reported on Saturday that Toyota plans to start
mass producing plug-in hybrid vehicles in 2012, with a projected
first-year output of about 20,000 to 30,000 units.

The Nikkei is likely to drift near its 25-day moving average,
which now lies near 9,800, as investors await forthcoming
economic data and corporate earnings for direction hints, said
Yumi Nishimura, deputy general manger for Daiwa Securities SMBC.

"There aren't any reasons to chase share prices higher,"
Nishimura said, adding that the there was also political
uncertainty ahead of a general election due by October.

A focal point in the near term will be the U.S. Institute for
Supply Management's non-manufacturing index due later on Monday,
she said.

Market analysts expect the Nikkei to trade between 9,700 to
9,900. The Nikkei closed down 0.61 percent at 9,816.07 on
Friday.

The Nikkei has lost some momentum after hitting an
eight-month high of 10,170.82 in June.

A Japanese opposition party candidate won a closely-watched
local gubernatorial election on Sunday, media said, the latest
setback for Prime Minister Taro Aso and his party ahead of a
tough national poll.

Nishimura at Daiwa Securities SMBC said Sunday's election
result by itself was unlikely to be a direct trading factor for
the Nikkei. But some investors may start to take a wait-and-see
stance until the general election takes place, she said.

The U.S. corporate earnings reporting season gets under way
this week with bellwethers Alcoa and Chevron posting quarterly
scorecards.

Alcoa's earnings could be a focal point, since the company's
performance is seen as offering hints on broader economic
conditions, Nishimura said.

U.S. financial markets were closed on Friday for a national
holiday.
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STOCKS TO WATCH

-- Aeon Co Ltd

Battered by weak sales of clothing and general merchandise at
its supermarkets, Aeon likely logged a 2 billion yen ($20.8
million) net loss for the March-May quarter, compared with a net
loss of 9.2 billion yen a year earlier, the Nikkei business daily
said on Monday.

-- NEC Corp

NEC will likely return to the overseas mobile phone makret in
the second half of 2010, most likely targeting Europe, the Nikkei
business daily reported on Monday.

It will sell high-performance mobile phones under the brand
of local telecommunications firms and is targeting sales of more
than 1 million phones in the first year, the Nikkei said.
(Reporting by Masayuki Kitano)