Nikkei down 1.1 pct, hurt by global economy fears

*Nikkei falls 1.1 percent after losing as much as 1.9 percent

*Trading houses lead falls on global economy worries, oil

*Amid uncertainty surrounding Lehman, some hope (Adds stocks, details)

By Aiko Hayashi

TOKYO, Sept 10 (Reuters) - The Nikkei average slipped 1.1 percent on Wednesday, led lower by trading houses like Mitsubishi Corp (8058.T) on a drop in oil prices and worries about the global economy, while tech shares were hurt by a firmer yen.

Worries about Lehman Brothers had pressured financial stocks sending the benchmark index sharply lower in earlier trade but banking shares later found higher ground, with some market participants saying that they had been oversold.

"It's not too strange that Japanese bank shares gain after their U.S. peers fell as Japanese banks had been sold off more in the last two months or so," said Soichiro Monji, chief strategist of the equity management department at Daiwa SB Investments.

Machine tool makers such as Okuma Corp (6103.T) dropped after industry data showed orders for Japanese machine tools fell 14.2 percent in August from a year earlier, reflecting a weakening global economy.

The benchmark Nikkei average .N225 shed 131.11 points to end the morning session at 12,269.54, after falling as much as 1.9 percent earlier.

The broader Topix declined 0.6 percent to 1,184.18.

Worries about the health of the global economy continued to hang over the market.

"Funds that had held stocks such as shippers were expecting to benefit from a global economic boom led by emerging economies but they are now dumping them as the situation has reversed," said Kenichi Hirano, operating officer at Tachibana Securities.

Uncertainty over whether Lehman LEH.N will be able to survive the credit crisis was also a major theme but some said that the investment bank's third-quarter results, due later in the day, could provide its management with the opportunity to reassure the market.

"I think there's a little bit of hope for Lehman's announcement tonight about its strategies," said Hirano.

Shares in Lehman Brothers, the No. 4 U.S. investment bank, skidded 45 percent on Tuesday after news that talks about a possible investment in Lehman from Korea Development Bank had broken down. [ID:nN09324233]

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