* Nikkei slides as domestic economy worries grow
* Banks drag in wake of disappointing U.S. peer earnings
* Market waiting for Toyota results at 0600 GMT
(Adds stocks, details)
By Elaine Lies
TOKYO, Aug 7 (Reuters) - The Nikkei stock average sank 1.2
percent on Thursday, defying a range of potentially positive
factors as gloom about the economy led to profit-taking, while
banks such as Mizuho Financial Group <8411.T> fell after
disappointing results from U.S. peers.
But the slide was limited by gains among some exporters,
while oil and gas field developer Inpex Holdings Inc <1605.T>
climbed on a brokerage upgrade.
Much of the market activity centred on individual factors
linked to specific shares, such as an outlook cut and ratings
downgrade that sent air-conditioner maker Daikin Industries Ltd
<6367.T> heading for its biggest one-day loss since 1992.
"Certainly the environment is one that should be positive,
with the weaker yen and lower oil prices," said Hideyuki
Ishiguro, supervisor at the investment strategy department at
Okasan Securities.
"But the idea that Japan's economy isn't good is spreading,
and the weaker yen now is starting to appear to be the result of
this rather than simple risk avoidance, so it's not having its
usual positive impact," he added.
A weaker yen boosts Japanese exporters by making their goods
more competitive overseas and increasing profits when
repatriated.
Japan's longest post-war economic expansion may be over,
government figures showed on Wednesday, as an index of
indicators including industrial output and corporate profits
sank in June. []
This sense of gloom lingered on Thursday even though core
private-sector machinery orders, a key gauge of corporate
capital spending, fell 2.6 percent in June, smaller than
economists' consensus forecast for a 9.6 percent drop.
[]
The benchmark Nikkei <> shed 161 points to 13,093.89
while the broader Topix <> fell 1.6 percent to 1,257.38.
SENSE OF SLOWDOWN
"There's been a growing sense since last week that Japan's
economic slowdown is worsening, and foreign investors are
starting to take a dimmer view of the market," said Katsuhiko
Kodama, senior strategist at Toyo Securities.
But he also noted that trade was volatile and that the
market could reverse itself and turn positive later in the day.
Toyota Motor Corp <7203.T> will announce results after the
close, with profit seen sliding by about a third, but market
attention is on its full-year forecasts and whether another
downward revision will emerge. Its shares were down 1.3 percent
at 4,580 yen.
Banks dragged on the market after American International
Group Inc <AIG.N>, the world's largest insurer, posted its third
consecutive quarterly net loss on Wednesday, hurt again by the
write-down of derivatives linked to bad mortgage investments.
"These results came out after the close, so investors are
wary since Wall Street hasn't really had a chance to process
them yet," Kodama said.
Top lender Mitsubishi UFJ Financial Group <8306.T> fell 3.4
percent to 873 yen, while No. 3 bank Sumitomo Mitsui Financial
Group <8316.T> fell 3.5 percent as well, to 714,000 yen. Mizuho
Financial Group sank 3.7 percent to 475,000 yen.
Daikin plunged 11.1 percent to 4,010 yen, down by its daily
limit, after the air-conditioner maker cut its full-year outlook
and Credit Suisse cut its rating to "underperform" from
"outperform".
The company's downward revision came after it posted a 24.6
percent drop in first-quarter operating profit, hurt by slower
demand in Europe due to a weaker economy and unseasonable
weather.
Losses were checked by gains among exporters such as Honda
Motor Corp <7267.T>, which climbed 0.9 percent to 3,470 yen,
while industrial robot maker Fanuc Inc <6954.T> rose 1.9 percent
to 8,740 yen.
Inpex rose 3.3 percent to 1.05 million yen after Nikko Citi
raised its rating to "buy/high risk" from "hold/high risk,"
saying the oil and gas field developer was likely to report
strong earnings and raise its outlook when it announces
first-quarter results on Friday.
Trade picked up, with 931 million shares changing hands,
compared with last week's morning average of 834 million.
Declining shares beat advancing ones by nearly four to one.
(Reporting by Elaine Lies; Editing by Hugh Lawson)
