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Oil and Gas

Nikkei slips on grim outlook for earnings, economy

*Nikkei slips 1.3 pct in lightest trade since Oct 1

*Stronger yen, worries about company results, economy weigh

*Commodities-linked firms suffer as oil below $60

*Trade thin as investors nervous before G20 summit (Adds details, stocks)

By Aiko Hayashi

TOKYO, Nov 12 (Reuters) - The Nikkei average fell 1.3 percent in light trade on Wednesday, hurt by a firmer yen and fears about a global recession, with commodity-linked stocks sliding as lower oil and copper prices sparked earnings concerns.

Inpex Corp 1605.T fell more than 5 percent after the oil and gas field explorer cut its full-year outlook on a drop in oil prices and a stronger yen, while Mitsubishi Corp 8058.T and other trading firms slipped after oil CLc1 tumbled to settle below $60 on Tuesday for the first time in 20 months. But chemicals firm Mitsubishi Rayon Co 3404.T bucked the trend and surged 11.4 percent after the maker of synthetic fibres and other chemicals said it will acquire unlisted British chemicals producer Lucite International for $1.6 billion in cash [ID:nT46372].

“The worst of the financial crisis may be over, but we now face this problem that we don’t know how much worse the economy will deteriorate and where it will find a floor,” said Koichi Ogawa, a chief portfolio manager at Daiwa SB Investments.

“Also, it’s hard to buy sectors that had benefited from the recent commodity boom as they could post a huge drop in earnings next business year. Demand is falling as the global economy worsens much faster than expected.”

Still, some market players said that buying from pension funds and retail investors who opened accounts as stock prices continued their slide appeared to emerge at the lows and kept the market supported.

In the lightest day of trade since Oct. 1, the Nikkei .N225 shed 113.79 points to end at 8,695.51. It has gained 1.3 percent so far this week, after diving 24 percent in October, the biggest monthly fall in its 58-year history.

The broader Topix .TOPX declined 1.6 percent to 875.23. Fears of a global slowdown grew after shares in General Motors Corp GM.N plummeted to a 65-year low on Tuesday, extending recent steep declines on concerns the automaker could run short of cash by early next year. [.N]

U.S. House of Representatives Speaker Nancy Pelosi sought legislation on Tuesday to bail out failing automakers, saying she was confident an emergency measure would be approved next week. [ID:nN11538789]

Many investors were also jittery ahead of this weekend’s summit of the G20 group of wealthy nations and large emerging economies in Washington to discuss steps to address the global financial crisis.

“The previous G7 summit was mainly aimed at dealing with the credit crisis, but this one is now struggling to tackle the issue of slowing economies, with the market hoping for some kind of joint international action,” said Takashi Ushio, head of the investment strategy division at Marusan Securities.

“If nothing emerges, there’s likely to be a huge shock, so nobody is buying at this point.”

TRADING FIRMS DROP AS OIL FALLS

The dollar was little changed against the yen at 97.69 yen JPY= after dropping as low as 97.15 yen earlier.

Canon Inc 7751.T slid 3.5 percent to 3,040 yen, while Honda Motor Co 7267.T shed 4.2 percent to 2,145 yen to become the top drag on the Nikkei 225.

Trading firms were hit as oil inched lower on Wednesday, after falling 5 percent a day earlier to close below $60 for the first time since March 2007, as weakening energy demand more than offset news of more supply reductions. [ID:nSP343335]

Mitsubishi, Japan's largest trading house, lost 8.1 percent to 1,387 yen and Mitsui & Co 8031.T fell 4.6 percent to 928 yen. Trading houses are major dealers in energy and have stakes in oil and gas projects.

Mining stocks such as Nippon Mining Holdings 5016.T tumbled after Shanghai copper futures fell to their weakest in almost four years on Wednesday on gathering gloom about the global economy. [ID:nSP362581] The shares tumbled 9.5 percent to 256 yen.

Hakudo Co 7637.T lost 10.5 percent to 682 yen after the specialist trader for nonferrous metals cut its annual outlook. Slowing capital spending at auto, microchip and flat display makers has led to sluggish demand for raw materials such as aluminium and copper used in car-, chip- and panel-making equipment.

Shares of all five stocks picked to join the MSCI Japan Index .MSCIJP in a routine reshuffle gained on the news, with ABC Mart Inc 2670.T adding 4.7 percent to book its highest close this year. [ID:nT68421]

Shares of Inpex dropped 5.4 percent to 510,000 yen, while Mitsubishi Rayon rose to 245 yen.

Trade was light on the Tokyo exchange’s first section, with 2.08 billion shares changing hands, compared with last week’s daily average of 2.55 billion.

Declining stocks beat advancing ones by more than 2 to 1. (Reporting by Aiko Hayashi; Editing by Sophie Hardach)

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