* Nikkei climbs on bargain-hunting after two days of falls * Economic doubts reignited by U.S. indicators * Sanyo Electric surges on hopes for batteries
* Daiwa Securities up on talk of DaVinci buy
TOKYO, June 17 (Reuters) - Japan's Nikkei stock average rose 0.7 percent on Wednesday, with Mitsubishi UFJ Financial Group and other banks climbing along with property firms as investors sought bargains after two days of falls.
Sanyo Electric Co surged nearly 5 percent after saying it had secured car makers in the United States, Japan and Europe as buyers of its auto-use lithium-ion batteries, as it looks to take advantage of growing demand for hybrid cars.
But clouds remained after mixed U.S. indicators reignited doubts about how fast the recession is easing, meaning further gains are likely to be difficult.
A rebound in U.S. housing starts in May pointed to some stabilisation in that sector, but industrial production fell 1.1 percent and capacity utilisation slumped to its lowest level on records dating back to 1967.
The benchmark Nikkei fell 2.9 percent on Tuesday for its worst day in more than two months, and while market analysts said further falls were likely there was little change in the overall rebound trend.
"The economy is definitely improving -- after all, the Nikkei rose as far as 10,000 from just over 7,000 in March, which is quite substantial," said Yoku Ihara, a manager at the investment information department of Retela Crea Securities.
Given that the Nikkei lost nearly 400 points on Monday and Tuesday, the market was ripe for bargain-hunting, especially in sectors such as banks and real estate which saw heavy selling earlier this week, analysts said.
"Support is holding along the 25-day moving average, and bargain-hunting is emerging on top of that, along with some short-covering," said Yutaka Miura, a senior technical analyst at Mizuho Securities.
The 25-day moving average currently comes in at just under 9,600. But the Nikkei on Tuesday fell below its five-day moving average and an uptrend line.
The Nikkei gained 67.41 points to 9,820.29, a day after posting its worst one-day percentage fall since March 30. The broader Topix gained 1 percent to 923.53.
Sanyo's shares rose 5.3 percent to 257 yen, outpacing a 1 percent gain in the electrical machinery sub-index.
Daiwa Securities Group Inc Japan's second-largest broker, rose 4.5 percent to 676 yen after sources said it will buy a real estate management unit of KK DaVinci Holdings to expand its property business.
Daiwa plans to buy all shares of KK DaVinci Select, which manages the assets of real estate investment trust (REIT) DA Office Investment Corp, the sources said, speaking on condition of anonymity as the deal has not been made public.
Mitsubishi UFJ Financial Group rose 2 percent to 613 yen and Mizuho Financial Group gained 2.9 percent to 253 yen. No. 3 bank Sumitomo Mitsui Financial Group rose 0.8 percent to 4,000 yen. (Reporting by Elaine Lies; Editing by Joseph Radford)