Nikkei ends 7-day winning streak on poor U.S. earnings

* Investors see poor U.S. earnings as chance to take profits

* Sharp rises on report to offer smartphone with Hon Hai

* Gree, DeNA up after Facebook surprises on mobile revenue

TOKYO, Oct 24 (Reuters) - Japan's Nikkei share average snapped a seven-session winning streak on Wednesday as poor U.S. earnings prompted investors to pocket gains on export-focused firms, although better-than-expected Chinese manufacturing data helped limit losses. Sharp Corp, however, bucked the downtrend after the Nikkei business daily said the company had started selling a smartphone in China developed in tandem with Taiwan's Hon Hai Precision Industry. Sharp's shares surged 6.4 percent. The Nikkei fell 0.7 percent to 8,954.30, ending below the key 9,000-mark after closing above that level in the previous three sessions. The seven-session winning streak had been the Nikkei's longest such run since July 2011. DuPont and United Technologies posted disappointing quarterly results on Tuesday, raising concerns about the impact of a global economic slowdown on earnings. Japan's export-oriented firms came under pressure after a rally propelled by a softer yen over the past week and a half, with automaker Honda Motor Co down 2.2 percent and construction machinery maker Komatsu Ltd off 2.5 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 benchmark Nikkei pared 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 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. Weak earnings from Japanese companies also weighed on the market, with the broader Topix down 0.8 percent at 743.27 in relatively active trade. About 1.78 billion shares changed hands on the Topix, up fr o m Tuesday's 1.58 billion and slightly ahead of last week's average of 1.77 billion. Although it is still early in the earnings season, seven out of the eight Nikkei companies that have reported quarterly results have missed market expectations, according to Thomson Reuters StarMine. That compared with 54 percent in the previous quarter. Among them was Chugai Pharmaceutical Co Ltd, which fell 3.4 percent.

OUTLOOK CUTS Kawasaki Heavy Industries sagged 5.7 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. JFE Holdings Inc, the country's No. 2 steelmaker, on Wednesday cut its full-year profit forecast by half amid worries that a delay in the Asian market recovery and the end of government incentives for eco-friendly cars would sap demand and prices. But the stock closed up 0.1 percent, faring better than the broader market, as ``nothing bad really happened,'' a trader said. SMBC Friend's Nakanishi said: ``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.'' However, Wednesday's most-traded Nikkei index options were a call with a strike price of 9,500, a 6.1 percent upside from the current level, and a November maturity, Societe Generale said. The next most-traded was a November put option at 8,000 , followed by another November put at 8,500 and a November call at 9,250. Other noticeable gainers included Japanese social gaming sites DeNA Co Ltd and Gree Inc, boosted after Facebook Inc reported a sharp growth in mobile advertising revenue during the third quarter. Gree advanced 3.3 percent and DeNA added 1.9 percent.