The Nikkei stock average is set to rise for the second straight session on Thursday, tracking U.S. gains made on hopes of an improvement in Europe's debt situation. Financial stocks in particular could gain, after their U.S. and European counterparts rebounded sharply after Germany's top court smoothed the way for Berlin's participation in bailouts that could ease Europe's debt crisis.

Wall Street bounced more than 2 percent on Wednesday, reversing three days of losses, but Japan's gains could be smaller, after the Nikkei's 2 percent rise on Wednesday to close at 8,763.41. The broader Topix index added 1.7 percent to 753.63.

Nine foreign securities houses placed net buy orders for 1.7 million shares before the start of trade on Thursday, following 29 trading sessions of net selling. Nikkei futures in Chicago ended at 8,870 on Wednesday, up 90 points, or 1 percent, from their Osaka close of 8,780.

"Buybacks and short-covering will continue, but the upside is heavy until we can confirm the strength of the U.S. economy and see an improvement in Europe," said Kenichi Hirano, operating officer at Tachibana Securities. Investors are looking ahead to President Obama's speech to Congress scheduled later on Thursday after the U.S. market close, to hear his administration's plans to boost the economy. Friday's special quotation, or "SQ," to settle Nikkei futures and options contracts expiring in September, could also affect trading. The closely watched settlement price is calculated from the opening prices of the 225 shares in the

Nikkei average.

The looming SQ settlement makes it "difficult to sell," Hirano said, and could keep trading in a relatively narrow range on Thursday. Analysts said that the Nikkei is expected to trade between 8,800 and 8,900 in Thursday's session. Read More