Nikkei falls nearly 3 pct on Italy fears

* Share losses more moderate than on Wall Street
* Bank shares drop in heavy trading
* Olympus shares untraded, down by daily limit 17 pct
* Bourse moves Olympus to supervisory post after close

By Lisa Twaronite
TOKYO, Nov 10 (Reuters) - Japan's Nikkei average fell nearly
3 percent on Thursday to its lowest close in five weeks after a
surge in Italian bond yields signalled that the worst may not be
over in Europe's debt crisis, while banks plunged after a drop
in their global peers.
Shares of Olympus Corp were overwhelmed by sell
orders and remained untraded, ending down by their daily trading
limit or 17 percent. After the close, the Tokyo Stock Exchange
placed Olympus on its supervisory list, bringing the 92-year-old
firm a step closer to delisting.
Italian 10-year bond yields shot to their highest since the
euro was introduced in 1999, after Prime Minister Silvio
Berlusconi said he opposed any form of interim government and
that the country must hold an election.
The election, which Berlusconi said was unlikely until
February, would leave a three-month policy vacuum that could
hinder progress on containing the region's debt crisis.
"The developments in Italy sent Wall Street down sharply,
but Japan's losses weren't as steep because Japan's recent gains
weren't as strong," said Kenichi Hirano, operating officer at
Tachibana Securities.
The Nikkei lost 2.9 percent to end at 8,500.80,
compared with a 3.7 percent drop in the Standard & Poor's 500
Index on Wednesday. The broader Topix index fell
2.6 percent to 730.30.
The Nikkei advanced 3.3 percent in October, while the S&P
gained 11 percent.
Volume was strong compared with recent sessions, with 1.96
billion shares changing hands, up from Wednesday's 1.8 billion
shares. Nearly 10 shares fell for each one that gained.
Like their overseas financial counterparts, shares of
Japan's three biggest lenders underperformed.
Sumitomo Mitsui Financial Group tumbled 4.7 percent
to 2,030 yen and Mitsubishi UFJ Financial Group lost
2.7 percent to 329 yen. They were the second- and third-heaviest
traded issues by turnover on the main board, respectively.
Nomura Holdings ended down 3.1 percent at 247 yen
after falling as low as 237 yen in the morning session, its
lowest since at least 1974, as brokerages fell in the downbeat
market.
Nomura shed nearly 15 percent on Tuesday, losing 160 billion
yen ($2 billion) in market capitalisation, the day Olympus
admitted it hid losses dating as far back as the 1990s. Olympus
is a client of Nomura, although Nomura was not a financial
adviser on any of the deals that are currently at the centre of
the scandal.
Olympus shares were overwhelmed by a glut of sell orders and
ended down 17.1 percent and by their daily limit of 100 yen, at
484 yen. The shares have lost more than 80 percent of their
value since Oct. 14.
On Thursday evening the bourse put Olympus on its
supervisory list and said it would be delisted if it fails to
submit earnings results by Dec. 14.
Shares of trading companies fell as gold prices dropped, and
following a fall in crude oil prices on Wednesday.
Mitsubishi Corp lost 4.8 percent to 1,560 yen and
Marubeni Corp fell 6.2 percent to 441 yen. Mitsui & Co
Ltd tumbled 5.5 percent to 1,111 yen.