TOKYO, May 28 (Reuters) - Japan's Nikkei average rose 1.8 percent on Friday after China said Europe remains a key investment market for its foreign-exchange reserves, soothing jittery financial markets and sending U.S. stocks sharply higher. Exporter shares such as Sony Corp (6758.T) climbed, helped by a halt in the yen's rapid advance, while Mitsubishi Corp (8058.T) and other trading houses rose on higher commodity prices as fears about euro zone debt problems eased. China's central bank said a Financial Times report on Wednesday that Beijing was concerned about its euro zone bond holdings was groundless. [ID:nTOE64Q04P] The report had driven the euro to a near four-year low against the dollar and near an 8-1/2-year low against the yen and pressured global stocks as investors worried that Europe's debt woes would grow into a larger financial crisis. "In addition to worries about Europe, North Korea and stricter financial regulation, May and November are also generally the months of the year that see a lot of moves by hedge funds to unwind their positions," said Tsuyoshi Segawa, an equity strategist at Mizuho Securities. "The phase of sharp erosion in sentiment may now be behind us, though unstable stock moves will likely continue for a while." The benchmark Nikkei .N225 gained 173.41 points to 9,813.13, moving further away from a six-month low below 9,400 hit the previous day before it ended up 1.2 percent on buying on dips. The index's relative strength index (RSI) climbed to around 36. Anything above 70 is considered overbought and below 30 is considered oversold. The broader Topix added 1.6 percent to 884.16. "Investors have been rapidly shrinking their holdings of risky assets lately, but if the market decides such a move has run its course, the market could return to a calmer state," said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets. EXPORTERS, COMMODITY-LINKED STOCKS GAIN Exporters gained ground to help push up the broader market after the euro surged nearly 3 percent on Thursday for its biggest one-day percentage rise in 15 months, although the currency had given up some of its gains in early Friday trade. [FRX/] Sony climbed 2.6 percent to 2,861 yen and Canon Inc (7751.T) advanced 2.7 percent to 3,780 yen. TDK (6762.T) jumped 3 percent to 5,420 yen. Shares of trading houses climbed after commodities prices rose, with copper rising on Thursday to its highest in two weeks as fears about euro zone debt eased and analysts looked to engines of growth outside Europe to keep the economic recovery on track. [ID:nLDE6370XM] Oil jumped 4 percent for its biggest two-day gain since August. [O/R] Mitsubishi rose 1.6 percent to 2,078 yen and fellow trading firm Mitsui & Co (8031.T) gained 1.5 percent to 1,323 yen. Sojitz Corp (2768.T) climbed 2.7 percent to 152 yen. The Nikkei business daily said a consortium of Sojitz and Shikoku Electric Power Co (9507.T) with French energy giant GDF Suez (GSZ.PA) won a contract to build and operate a pair of power plants in Oman as independent power producers. [ID:nSGE64Q0EB]

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