UPDATE: Asian Shares Mixed; China Market Jitters Weigh

SINGAPORE -- Asian stock markets were mixed Wednesday as a positive boost from gains for U.S. stocks was somewhat overshadowed by the uncertain outlook for China shares. In Japan, Sanyo Electric powered higher on a report that Toyota Motor would buy its batteries for hybrid vehicles.

Japan's Nikkei 225 was down 0.2% at the midday break having spent the morning seesawing between positive and negative territory. Australia's S&P/ASX 200 was 0.8% higher, South Korea's Kospi Composite gained 0.3%. Hong Kong's Hang Seng was 0.1% lower while China's Shanghai Composite was flat.

There were more signs of a recovery for the U.S. economy Tuesday as better-than-expected second quarter results from retailers - Home Depot and Target - helped lift the Dow Jones Industrial Average 0.9%. DJIA futures were 16 points lower in screen trade.

But worries over jittery China shares were casting a shadow over the region. "Unless you're a day-trader, why would you want to hold stocks in view of lingering uncertainties over Chinese stock markets?" said Yuanta Securities head of sales trading Riga Saito.

China shares were sharply lower Monday and although they staged a small recovery on Tuesday, the recovery appeared to be fizzling out Wednesday.

"Yesterday's trade volume in Shanghai was a low CNY123.23 billion, a drastic reduction from July 29's record high of CNY302.82 billion. This shows investors are still very cautious, afraid they'll lose money if they buy at these levels," said Guosen Securities analyst Tang Xiaosheng.

New Zealand's NZX-50 rose 0.1% and Taiwan's main index was up 0.4%. Singapore's Straits Times Index was down 0.4% while Malaysia's main index was off 0.3% and Indonesian shares were flat. Philippine shares were 1.3% higher and Thailand shares were flat.

In Japan, Sanyo Electric surged 14.3% after the Nikkei reported that Toyota Motor would procure batteries for hybrid vehicles from Sanyo starting around 2011 because the automaker's own battery joint venture could not keep up with demand. Toyota shares were 1.7% higher.

A person familiar with the situation told Dow Jones Newswires that the two were discussing the possibility of the auto maker buying batteries for hybrid vehicles though both Toyota and Sanyo declined to comment on whether the firms were in talks over the supply of batteries.

Technology shares were getting some support from Hewlett Packard's after-hours release of fiscal third quarter profits that were just above the company's May targets. It also issued a fiscal fourth-quarter earnings view that was above expectations. The technology giant said it was seeing a "stabilized market" and suggested that technology spending has hit bottom.

Japan's Toshiba rose 0.2% while South Korea's Hynix Semiconductor was up 3.9%. In Hong Kong, Foxconn rose 5.1%.

The Hong Kong market was taking its cue from lackluster China shares. Li & Fung was down 1.9% on profit-taking after the stock's recent strong post-results run. Esprit was up 4.5% after data Tuesday showed expectations for the German economy at their brightest since April 2006.

In Taiwan, PC component makers were gaining after the Taiwan External Trade Development Council said that Lenovo Group expects to buy around US$2.7 billion worth of electronics. Catcher was up 0.7%, Chicony was up 1.2% and Compal Electronics was 1.3% higher.

New Zealand shares were helped by positive results from casino, cinema and hotel operator Sky City. The stock was up 2.1% after it posted better-than-expected fiscal year results. "The results have been reasonably positive here and across Australia and the U.S., and generally you are seeing a 'buy the dip' mentality," said Brad Gordon, adviser at Macquarie Equities.

Fletcher Building was up 0.6% as its Australian peer Boral's earnings beat expectations while Fisher & Paykel Appliances rose 2.5%.

In Australia, Qantas was up 5.0% after reporting pretax profit of A$181 million, near the top end of its A$100 million-A$200 million guidance.

In foreign exchange markets the euro and the dollar were slightly lower against the yen as falls for the Nikkei prompted short-term investors to reduce risks. The euro was at Y133.81 from Y133.84 in late New York trade on Tuesday while the dollar was at Y94.60 from Y94.70. The euro was little changed against the dollar at $1.4137 from $1.4135.

The yield on the benchmark 10-year Japanese government bond rose slightly as Tokyo equities drifted in directionless trading and was last up 0.5 basis point from Tuesday's close at 1.345%. The price of the key September futures contract for the 10-year bond was up 0.02 point at 138.77 points.

Spot gold was at $941.20 per troy ounce, up $3.10 from the New York close. Standard Bank analysts said physical buying was providing support for the yellow metal: "In January, we would see (physical) buying coming in at $850-$870. Now, we see buying whenever the gold price gets close to $900-$920."

However, the bank added "part of the buying is likely to be seasonal and this support may move lower again once seasonal demand passes towards year-end."

Base metals were a little lower after U.S. home construction data Tuesday registered a surprising 1.0% drop in July. The LME three-month aluminum futures contract was trading at $2,000 per ton, down $5 from the London kerb. LME three-month copper was at $6,035 per ton, down $45.

Barclays Capital revised up its LME cash base metal price forecasts, and said it expected further upside in most markets as the economic recovery gathered steam. It now expects LME cash copper to average $5,140 per ton this year, and $6,438 next year. LME cash aluminum this year was tipped at $1,650 per ton on average and $1,875 per ton next year.

The Nymex September crude oil futures contract was up $0.86 from the New York close, at $70.05 per barrel on Globex, extending its $2.44 gain on Tuesday. Prices were lifted by an after-hours report from the American Petroleum Institute which showed that U.S. crude oil inventories fell by 6.134 million barrels in the week ended August 14. Analysts had expected a rise.