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* Nikkei poised to post biggest daily gain since March 2011
* Market recovers from 'China shock' - traders
* Japan's liquidity attracts investors during Asian trade - traders
* Toshiba falls to lowest since Dec. 2012 after CLSA cuts rating
By Ayai Tomisawa
TOKYO, Sept 9 (Reuters) - Japan's Nikkei share average rebounded 5 percent on Wednesday morning as rallies in U.S. and European stocks dramatically boosted morale after the Nikkei wiped out its year-to-date gains on Tuesday.
The Nikkei jumped 5.0 percent to 18,289.40 in midmorning trade after falling below 17,450.77 in the previous session, last year's closing price, and erasing all the gains made this year.
If the gains hold, the Nikkei is on track to post the biggest daily gain since March 16, 2011.
"Yesterday's selling was overdone," said Masashi Oda, senior investment officer at Sumitomo Mitsui Trust Bank. "Some (short-term) investors seemed to be trading on volatility."
Traders said that the Japanese market tends to be volatile as it is the most liquid market open during Asian trade. If the Chinese market falls, investors would trade on Japanese shares to hedge against the fall in China, they added.
Chinese stocks surged in late Tuesday trade, sparking a rebound in global equities. Hopes for more stimulus measures from the Chinese government increased after its trade data on Tuesday showed that China's imports shrank far more than expected in August, falling for the 10th straight month.
Also improving sentiment was data showing that Germany's imports and exports hit record highs in value terms in July, which underpinned gains in European stocks.
"It looks like the global market is recovering from the China shock," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center.
But he added that once investors bought back recently-battered shares, they will likely stay on the sidelines.
"Next week's FOMC (Fed meeting) is the main focus for now. Investors do not want to take positions aggressively until they confirm what the Fed will do with rates," Nakai said.
A mixed report on the U.S. jobs market for August last Friday added to investor uncertainty about whether the Federal Reserve will increase interest rates at its Sept. 16-17 meeting.
All of the Topix's 33 subsectors were in positive territory.
Brokerage stocks jumped, with Nomura Holdings up 5.9 percent and Daiwa Securities Group rising 5.0 percent.
Exporters also gained ground. Toyota Motor Corp jumped 3.9 percent and Honda Motor Co gained 3.4 percent.
Toshiba Corp, on the other hand, fell as much as 4.4 percent to 322.3 yen, the lowest since Dec. 2012 after CLSA cut its rating to 'sell' from 'buy' and reduced its earnings per share estimate and profit outlook. The broker cited challenges in its energy business and the PC and TV businesses.
The broader Topix gained 3.9 percent to 1,472.64 and the JPX-Nikkei Index 400 advanced 4.1 percent to 13,223.36. (Reporting by Ayai Tomisawa; Editing by Eric Meijer)