Nikkei poised to snap 7-day rally on economy fears

(Updates to midafternoon)

TOKYO, Jan 8 (Reuters) - The Nikkei average slid 3.3 percent on Thursday, poised to snap a 7-day rally, after grim U.S. jobs data and an Intel Corp (INTC.O) revenue warning fanned fears the recession was deepening, hitting chip stocks and other exporters.

Oil and gas field developer Inpex (1605.T) and other resource-linked shares sank after oil fell 12 percent to log its largest percentage fall in 7 years.

But Mitsubishi Motors Corp (7211.T) shot up after a newspaper report that the automaker will begin supplying electric cars to PSA Peugeot Citroen Group (PEUP.PA), while defensive stocks such as household goods maker Kao Corp (4452.T) gained as exporters lost steam. [ID:nT84599]

"The market fell quite a bit as everyone rushed to take profits, spurred by nervousness about the fate of the global and the U.S. economies," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"But it's too early to say this is the start of a downward trend as market optimism over economic stimulus steps by the new U.S. administration is still running high."

The benchmark Nikkei .N225 shed 303.49 points to 8,935.75, on course to snap its longest winning streak since the one that ended in April 2006. It gained nearly 9 percent in the past seven trading sessions.

The broader Topix lost 2.7 percent to 864.68.

Recession fears were heightened after ADP, a private employment service, said U.S. private employers shed 693,000 jobs in December, up from the revised 476,000 jobs lost in November and far more than economists estimated. [ID:nN07470568].

Investors will closely watch non-farm payrolls and unemployment data due on Friday.

CHIP EQUIPMENT MAKERS TUMBLE

Shares of Tokyo Electron Ltd (8035.T) and other chip equipment makers fell sharply after semiconductor maker Intel on Wednesday issued its second revenue warning on the fourth quarter due to weak demand. [ID:nN07475140]

The warning sparked concern that orders for equipment from Intel, the world's biggest maker of the central processing units at the heart of every personal computer, and other chip makers will slow further.

Tokyo Electron tumbled 11.7 percent to 3,400 yen, Advantest Corp (6857.T) dropped 10.4 percent to 1,465 yen, Disco Corp (6146.T) lost 11 percent to 2,235 yen and Nikon Corp (7731.T) shed 7.3 percent to 1,169 yen.

Kyocera Corp (6971.T), an electronic parts maker with a chip component division, was also hurt by a brokerage downgrade on a weaker earnings outlook. It slid 6.1 percent to 6,780 yen after JP Morgan cut its rating to "neutral" from "overweight" and lowered ts target price to 6,500 yen from 8,500 yen.

Shares of Inpex sank 8.9 percent to 680,000 yen.

Trading houses, which are major dealers in energy and have stakes in oil and gas products, also fell. Mitsubishi Corp (8058.T), Japan's largest trader, slid 5.8 percent to 1,326 yen, while Mitsui & Co (8031.T) shed 6.3 percent to 986 yen.

Aeon Co Ltd (8267.T) fell 4.2 percent to 837 yen after Japan's no. 2 retailer said it may post its first annual net loss in seven years, hit by flagging sales, a writedown at U.S. unit Talbots (TLB.N) and accounting changes. [ID:nT366933]

Top retailer and convenience store operator Seven & I Holdings (3382.T), which gained 3.2 percent, is set to report results after the close.

Mitsubishi Motors jumped 5 percent to 146 yen.

Kao, Japan's largest toiletry good maker, rose 1.2 percent to 2,550 yen, while Japan Tobacco (2914.T), the world's third-largest cigarette maker and half-owned by the Japanese government, added 1.5 percent to 296,300 yen. (Reporting by Aiko Hayashi; Editing by Edwina Gibbs)