* Nikkei falls below 25-day moving average
* Retail stocks tumble after Seven & I Q1 profit decline
By Masayuki Kitano
TOKYO, July 3 (Reuters) - Japan's Nikkei stock average fell 1.8 percent on Friday after bleak U.S. jobs data revived caution about the outlook for the global economy, while retail stocks tumbled after Seven & I Holdings reported a drop in quarterly profit.
Shares of oil and gas field developer Inpex and other oil-related shares dropped after crude oil prices fell nearly 4 percent on Thursday.
The U.S. Labor Department reported on Thursday that U.S. employers cut 467,000 jobs in June, 100,000 more than Wall Street economists had expected. The unemployment rate hit 9.5 percent, the highest in nearly 26 years.
"It is hard to be optimistic about the outlook," said Yutaka Miura, senior technical analyst at Mizuho Securities.
"The economy has been improving after deteriorating sharply toward March, but we now need to watch whether this will be sustainable," Miura said.
The Nikkei may face more weakness in the near term, since it has fallen below its 25-day moving average, Miura said, adding that one key for Tokyo shares next week will be whether the Nikkei can hold above the 9,500 level. The 25-day moving average is now around 9,800. The Nikkei fell 172.95 points to 9,701.54.
The broader Topix index fell 1.6 percent to 909.47.
Seven & I, Japan's largest retailer slid 7.4 percent to 2,135 yen after it kicked off the current earnings season with a 17.5 percent drop in first-quarter profit as cost-cutting failed to offset sharp sales declines at its department stores and supermarkets.
Other retail stocks also suffered with rival Aeon dropping 2.8 percent to 910 yen. Fast Retailing, operator of the cheap clothing chain Uniqlo fell 3.2 percent to 12,020 yen despite reporting a 6.4 percent rise in its Japan same-store sales for June.
While there are growing views that the worst of the global recession is likely over, there are mixed views about how quickly the economy will recover from here on, said Masayuki Doshida, market analyst for Matsui Securities.
Doshida added that it would take a particularly strong factor for the Nikkei to rise to levels above 10,000.
Inpex fell 3 percent to 725,000 yen. (Additional reporting by Elaine Lies; Editing by Edwina Gibbs)