Nikkei falls, set to snap 7-day winning streak
* Sharp in focus, to offer smartphone with Hon Hai
* Gree and DeNa up after Facebook surprises with mobile revenue
* Investors see poor U.S. earnings as chance to take profit
* Exporters off after rally inspired by weaker yen
TOKYO, Oct 24 (Reuters) - Japan's Nikkei share average fell on Wednesday morning after poor U.S. earnings prompted investors to take profits on export-oriented firms after a steep seven-day rally, although better-than-expected Chinese data limited losses. Sharp Corp, however, bucked the downtrend after the Nikkei business daily said it had started selling a smartphone in China developed in tandem with Taiwanese company Hon Hai Precision. Sharp's shares gained 4.5 percent and it was the most-traded stock on the main board. Japanese social gaming sites DeNa and Gree also gained in heavy trade after Facebook Inc said mobile advertising revenue had roughly tripled in the third quarter, reassuring investors who had feared revenues of web-based firms would be hit by the shift to smartphones from personal computers. DeNa added 3.3 percent while Gree advanced 4 percent. But export-oriented firms weakened after a rally propelled Corp and construction machinery maker Komatsu Ltd both slipping 1.5 percent. ``We can see this as a temporary, short-term adjustment,'' said Fumiyuki Nakanishi, manager of investment and research at SMBC Friend Securities. ``With the yen still soft and stocks at highs after the rally, it's a very good moment for people to take profits.'' The Nikkei dipped 0.3 percent to 8,983.27 by the midday break, but held above its 25-day moving average at 8,872.59 after seven straight days of gains to Tuesday, its longest winning streak since July 2011. The benchmark pared its early losses after data showed Chinese output had reached a three-month high in October and orders were their strongest since April, although growth continued to shrink. The China HSBC Flash Manufacturing Purchasing Managers Index (PMI) hit 49.1, the highest level since July but below the 50-point level separating expansion from contraction. ``This is a surprisingly good result considering the worsening of trade relations between China and Japan since September,'' said Masayuki Otani, chief market analyst at Securities Japan, referring to a territorial spat between the two countries over disputed islands. The broader Topix lost 0.5 percent to 745.94 in moderate trade, with volume at 52.7 percent of its 90-day average.
EARNINGS SEASON STARTS A slew of big companies are due to report on profits on Wednesday, including JFE Holdings Inc, Yahoo Japan Corp , Nintendo Co Ltd and KDDI Corp. KDDI gained 0.8 percent after the Nikkei business daily said it was going to integrate its cable business with Sumitomo Corp Jupiter Telecommunications. Jupiter lost 2.8 percent as investors judged it overpriced, as its 44 percent gain over the past two sessions had brought it to more than the 110,000 yen that the Nikkei said KDDI and Sumitomo would offer per share. Sumitomo also lost 0.3 pe r cent. ``Seeing as the market has now recovered after a sell-off on doubts about earnings, it's possible that it could fall sharply again as we start to see actual earnings come out and people realise that it really is as bad as expected,'' Nakanishi of SMBC Friend Securities said.On Wednesday morning, Kawasaki Heavy Industries Ltd sagged 4.5 percent after the company almost halved its first half operating profit forecast to 10.3 billion yen ($129 million), citing weaker-than-expected sales of precision equipment and motorcycles due to a slowdown in China and Europe. Canon Inc dropped 0.9 percent and Ricoh Co Ltd lost 1.5 percent after U.S. rival Xerox Corp, historically known for printers and copiers, reported lower-than-expected third-quarter revenue and cut its full-year earnings forecast. But All Nippon Airways went against the trend by gaining 1.3 percent after the Nikkei business daily said the carrier was expected to post an operating profit of 70 billion yen ($877 million) for the six months ended September, a 40 percent year-on-year increase, on strong overseas travel.