July 21 (Bloomberg) -- Japanese stocks advanced after Goldman Sachs Group Inc. lifted its estimate for the Standard & Poor’s 500 Index on improving earnings and as raw materials prices rose. Hitachi Construction Machinery Co., the world’s largest maker of giant excavators, jumped 5.8 percent after a brokerage upgraded the shares. Honda Motor Co., which generates half its sales in North America, rose 2.2 percent. Itochu Corp. led gains by trading houses after Credit Suisse Group AG reinstated coverage at “outperform” and commodities prices rose. “The earnings recovery of U.S. companies is following a familiar pattern of conservative guidance being beaten and giving rise to a relief rally,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments Ltd. in Tokyo, which manages $28 billion. “The Japanese market should continue to gain based purely on the strength of overseas stocks.” The Nikkei 225 Stock Average rose 137.80, or 1.5 percent, to 9,533.12 as of 12:47 p.m. in Tokyo, a fifth-straight climb. The broader Topix index added 1.8 percent to 894.19. Japan’s markets were closed yesterday for a holiday. In New York, the Standard & Poor’s 500 Index climbed 1.1 percent to 951.13, the highest level since Nov. 5. CIT Group Inc. soared 79 percent. The lender said after the close of trading it will receive a $3 billion loan for 2.5 years from a group of its bondholders as it seeks to restructure its debt and avoid bankruptcy. Election Campaign “CIT’s bridge financing and the target boost to the S&P 500 by Goldman Sachs spurred gains in the U.S. and will feed into the market here today,” said Fumiyuki Nakanishi, a Tokyo- based strategist at SMBC Friend Securities Co. David Kostin, U.S. strategist at Goldman, boosted his year- end estimate for the S&P 500 to 1,060 from 940, citing earnings reports that have been stronger than expected. Additionally, Japan’s lower house of parliament will dissolve today for the start of campaigning ahead of an election to be held on Aug. 30. The opposition Democratic Party of Japan had twice the support of the ruling Liberal Democratic Party, according to a Kyodo News poll released July 19. Hitachi Construction rallied 5.8 percent to 1,543 yen after KBC Groep NV boosted the stock to “hold” from “sell” on the view that the shares have become cheap in spite of a weak outlook. Komatsu Ltd., the world’s second-largest maker of construction machinery, added 4.6 percent 1,474. The companies also got a boost after Merrill Lynch & Co., the brokerage bought by Bank of America Corp., lifted larger rival Caterpillar Inc. to “buy” on signs the construction market is turning around. Honda, Toyota Honda, Japan’s second-largest automaker, advanced 2.2 percent to 2,530 yen. Canon Inc., the world’s largest seller of digital cameras, climbed 1.9 percent to 3,150 yen. Denso Corp., the nation’s largest auto-parts maker, added 3.6 percent to 2,565 yen. A measure of six metals traded on the London Metal Exchange, including copper and zinc, added 1 percent yesterday, a sixth- consecutive advance. Oil rose to a two-week high yesterday in New York. Iron ore delivered to China jumped 4.6 percent last week, according to Metal Bulletin. Itochu surged 5.2 percent to 671 yen. Takashi Murakami, an analyst at Credit Suisse, rated the stock “outperform” after it was on the brokerage’s restricted list, on the view that it is the cheapest of Japan’s trading houses. Mitsubishi Corp., which generates half its profits from raw materials, rose 5.2 percent to 1,789 yen. Nippon Mining Holdings Inc., Japan’s biggest copper producer and an oil refiner, added 4.2 percent to 474 yen after the Nikkei newspaper said the company will likely swing to a 25 billion yen ($266 million) pretax profit for the latest quarter. It had a pretax loss of 31.3 billion yen in the previous three-month period. Mitsubishi Chemical Holdings Corp., Japan’s largest petrochemical producer, rallied 7.3 percent after Merrill Lynch rated the company “buy” in new coverage, citing the prospects for improved profitability in textiles chemicals. To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

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