(Updates with closing prices)

TOKYO, June 30 (Reuters) - Japan's Nikkei share average

closed at a more than 11-month high on Monday as investor risk

appetite grew after a strong rally in U.S. equities, driven by

hopes for trade talks and Federal Reserve's rate cuts.

The Nikkei rose 0.84% to close at 40,487.39, its

highest closing level since July 17. The index narrowed its

earlier gains as investors booked profits from the sharp gains

of the index, which rose for a fifth straight session.

The broader Topix climbed 0.43% to 2,852.84.

A strategist at a domestic brokerage said a rally of U.S.

equities last week and hopes of Fed rate cuts, as well as easing

tension in the Middle East, helped investors to turn "risk-on".

"There are still uncertainties surrounding U.S. tariff

policy and geopolitical risks as well as the policy of central

banks," said Takeo Kamai, head of execution services at CLSA in

Tokyo.

"But that has become a new normal. The Nikkei is strong

enough to head towards the next milestone of around the 42,000

level," he said.

Wall Street extended its rally on Friday, sending the S&P

500 and Nasdaq to all-time closing highs as trade deal hopes

fueled investor risk appetite and economic data helped solidify

expectations for rate cuts from the U.S. Federal Reserve.

In Japan, start-up investor SoftBank Group jumped

4.32% to become the biggest source for the Nikkei's gains.

Chip-making equipment maker Tokyo Electron ( TOELF ) and

chip-testing equipment maker Advantest ( ADTTF ) rose 0.6% each.

Automakers fell after U.S. President Donald Trump said in an

interview broadcast on Sunday that Japan engages in "unfair"

automobile trade with the U.S.

Toyota Motor ( TM ) and Honda Motor ( HMC ) lost 1.35%

and 1.86%, respectively.

Of more than 1,600 stocks trading on the Tokyo Stock

Exchange's prime market, 54% rose and 40% fell, and 4% traded

flat.