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Tokyo's Nikkei closes down, Sydney rallies two percent (lead)

Tokyo stocks edged down Tuesday after three straight days of gains, while Australian banks surged on relief that a national inquiry into abuses in the financial sector was not as damaging as feared.

With most Asian markets closed for Lunar New Year business was thin, though Japanese, Australian and New Zealand traders were given a positive lead from Wall Street, supported by hopes for China-US trade talks and a slower pace of rate hikes by the Federal Reserve.

Japan's benchmark Nikkei 225 index fell 0.19 percent, or 39.32 points, to 20,844.45, but the broader Topix index rose 0.10 percent, or 1.55 points, to 1,582.88.

The Nikkei dipped despite the dollar rising to 109.96 yen, from 109.92 yen in New York and 109.74 yen in Tokyo on Monday.

The Nikkei started with gains but fell into negative territory as Uniqlo operator Fast Retailing and other market heavyweights "extended their losses due to concerns over their business outlook," said Shinichi Yamamoto, broker at Okasan Securities in Tokyo.

"Market sentiment is not so bad but selling pressure tends to emerge whenever the Nikkei index approaches 21,000," Yamamoto told AFP.

In Tokyo, Fast Retailing lost 2.84 percent to 49,100 yen following a decline in domestic sales in January.

Pharma firm SanBio plummeted 29.38 percent to 2,620 yen, extending a sell-off that has seen its stock lose 78 percent in the five days since it announced a failure in a key trial for a traumatic brain injury drug.

Mobile phone carrier SoftBank was up 0.44 percent at 1,359 yen. After the closing bell, the firm said its nine-month net profit gained 18.7 percent in the wake its IPO in December.

Panasonic was down 2.45 percent at 1,035 yen as a brokerage house revised down its view of the shares' value and after the electronics firm said its nine months to December net profit declined 13 percent year-on-year.

Traders are also awaiting US President Donald Trump's State of the Union address due on Tuesday.

- Banks lead gains in Sydney -

Elsewhere Sydney rose two percent, Wellington put on more than one percent and Mumbai edged up 0.2 percent but Bangkok dipped 0.1 percent.

Banks led gains in Sydney after a year-long Royal Commission inquiry into financial services scandals referred more than 20 cases to regulators and called for substantial changes in the sector.

However, it did not call for criminal prosecution, disappointing some observers who had demanded the heads of individual senior executives who allowed or perpetuated the repeated misconduct and breaches.

Analysts said much of the report's findings had been expected.

Among the "Big Four" in the country's banking sectors Westpac surged more than seven percent, Commonwealth Bank piled on 4.7 percent and National Australia Bank was up 3.9 percent, while ANZ jumped 6.5 percent.

"The soft recommendations of the Royal Commission final report is a clear win for the banks," UBS Group AG analysts wrote in a note.

"We do not believe that any of the 76 recommendations by themselves will have a material financial impact on the banks."

There was little reaction to news the Reserve Bank of Australia had lowered its annual growth forecasts for the economy and held interest rates at record lows.

-- Bloomberg News contributed to this story --