* Nikkei down 0.7 pct, financials fall after 2 days of big gains
* Crude oil’s drop to 3-month lows dents investor risk appetite
By Shinichi Saoshiro
TOKYO, Aug 2 (Reuters) - Japan’s Nikkei share average slipped on Tuesday with a slide in crude oil prices denting investor risk sentiment, while financials fell after two days of large gains.
The Nikkei was down 0.7 percent at 16,527.17.
The market has been weighed by the yen’s recent appreciation and a drop by crude oil prices to three-month lows adding to the sombre mood.
“The U.S. ISM data out overnight was not all that encouraging, and lower oil is prompting a bit of risk aversion,” said Chihiro Ohta, general manager of investment research and investor services at SMBC Nikko Securities.
The Institute of Supply Management (ISM) data released on Monday showed the U.S. economy’s factory sector expanded at a slower pace in July.
“The Nikkei had not been able to make further advances after rising significantly, and we are also starting to see a retracement of some of those gains,” Ohta said.
The Nikkei had gained more than 6 percent in July, when it hit a 1-1/2-month high on monetary and fiscal stimulus hopes.
The financial sector was among those that retraced previous gains, with the banking sub-index falling 2.9 percent on profit taking.
The sub-index had gained more than 10 percent over the past two sessions after the Bank of Japan refrained on Friday from charging more interest to financial institutions for parking their excess reserves at the central bank.
Mitsubishi UFJ Financial Group Inc fell 3.8 percent, Sumitomo Mitsui Financial Group Inc lost 2.6 percent and Mizuho Financial Group Inc dropped 1.8 percent.
Nippon Express Co rose as much as 2.3 percent after the Nikkei business daily reported that the transportation service operator will work with China’s Alibaba Group Holding to ship Japanese goods to China for less than prevailing rates.
NOK Corp lost 5.2 percent after the industrial machinery manufacturer saw its operating profit drop 96.8 percent year-on-year in the April-June quarter due to a stronger yen and reduced orders for smartphone electronics parts.
Keyence Corp climbed 3 percent after the electronic application maker saw its April-June operating profit increase 7.2 percent from the previous year to 49.1 billion yen ($478 million).
The broader Topix fell 0.7 percent to 1,312.27 and the JPX-Nikkei Index 400 declined 0.7 percent to 11,798.05.
$1 = 102.7300 yen Editing by Sam Holmes