TOKYO, May 9 (Reuters) - Japan's Nikkei share average

hit a more than one-month high on Friday, as risk appetite was

lifted by hopes of progress in U.S. trade talks and domestic

firms' better-than-expected outlook.

The Nikkei rose 1.49% to 37,478.58 by the midday

break, its highest level since March 27, and is set to post a

1.76% weekly gain.

The broader Topix rose 1.46% to 2,738, and was set

for an 11-session rally - its longest since October 2017.

"Investors see that the market slump in April was the worst,

and the environment not just for equities but for bonds is only

getting better as more compromises on trade talks could be

possible," said Hiroyuki Ueno, chief strategist at Sumitomo

Mitsui Trust Asset Management.

U.S. President Donald Trump and British Prime Minister Keir

Starmer on Thursday announced a limited bilateral trade

agreement that leaves in place Trump's 10% tariffs on British

exports.

Financial markets are now awaiting the outcome of

preliminary U.S.-China trade talks due to begin on Saturday in

Switzerland.

Trump said on Thursday he expects there to be substantive

negotiations between the two countries, and predicted that

punitive U.S. tariffs on Beijing of 145% would likely come down.

"The market was also relieved that the outlook of Japanese

firms, including Toyota, is not severely affected by the U.S.

tariffs," said Ueno.

Investors were once pessimistic about the corporate outlook

amid uncertainties about the impact of U.S. tariffs.

Among individual stocks, NTT Data ( NTTDF ) surged 14% after

NTT said it would take the subsidiary private by

purchasing the shares it does not already own at 4,000 yen per

share.

Ajinomoto ( AJINF ) rose 6.24% after the food and healthcare

company announced a 100-billion-yen ($686.2 million) share

buyback.

On the other hand, air-conditioning maker Daikin Industries ( DKILF )

fell 5.03% to become the worst percentage loser on the

Nikkei, and also weighed on the Nikkei the most.

($1 = 145.7300 yen)

(Reporting by Junko Fujita; Editing by Varun H K)