* Slide in China shares trims gains, but still up
* Nikkei marks fifth straight week of gains
* Brokerage upgrades dominate market moves in holiday season
* Komatsu, Hitachi Construction jump on upgrades
By Elaine Lies TOKYO, Aug 14 (Reuters) - Japan's Nikkei average rose 0.8 percent to hit a 10-month high on Friday, helped by growing evidence of an improving global economy but falls in Chinese stock markets helped it come off earlier highs.
Big gainers for the day included Komatsu Ltd, the world's second-biggest maker of construction machinery equipment, as well as rival Hitachi Construction Machinery which rose on rating upgrades from brokerages.
Concerns over an increased supply of shares amid new listings and rights issues sent Shanghai shares down over 3 percent at one point and dragged Hong Kong down as well.
"There's no question that the world economy is improving, but stock markets have risen further than is warranted by recovery at this point, making them vulnerable to profit-taking," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
"Short-term investors are looking to China for cues." The benchmark Nikkei rose 0.8 percent or 80.14 points to 10,597.33, its highest close since early October, after earlier rising as much as 1.1 percent. Volume was boosted mostly by trade related to the settlement of Nikkei options contracts.
It gained 1.8 percent on the week for its fifth straight week of gains.
The broader Topix added 0.5 percent to 973.57.
Helping lift the market was data showing Germany and France ended their recessions in April-June, earlier than many policymakers and economists had expected.
That helped the market shrug off a U.S. Commerce Department report that retail sales fell 0.1 percent in July, defying market expectations of a gain. Initial jobless claims also rose, though economists had expected a drop.
"The general trend of economic recovery hasn't changed," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC.
"The market simply reaffirmed the fact that consumer spending and employment haven't really caught up with the recovery momentum yet."
Japan's second-quarter GDP is due out on Monday, and a Reuters poll of analysts showed they expect on average the economy to have grown 1.0 percent following contractions the previous two quarters.
RATINGS BOOST
Amid a dearth of news, a slew of brokerage upgrades -- which analysts said reflected a generally solid first-quarter earnings season -- kept the Nikkei supported.
Komatsu jumped 5.3 percent to 1,716 yen after Macquarie Research lifted its rating to "outperform" from "underperform" and while Hitachi Construction soared 8.4 percent to 1,930 yen after Mitsubishi UFJ lifted its rating.
Ebara Corp, a maker of pumps, surged 7.9 percent to 382 yen after UBS Investment Research gave it a short-term "buy" rating and put the stock on its list of focus stocks.
Computer security firm Trend Micro gained 3.2 percent to 3,510 yen after Nomura Securities raised its rating and lifted its target price to 4,000 yen from 3,000 yen, citing new product launches and an early recovery from the recession as companies prioritise security investment.
Trade was moderate on the Tokyo exchange's first section, with 2.1 billion shares changing hands, in line with last week's daily average.
Advancing stocks outnumbered declining ones, 969 to 547. (Additional reporting by Aiko Hayashi; Editing by Edwina Gibbs)