* Volumes lowest since quake as U.S., Japan earnings eyed
* Automakers down, cut to "sell" by Citigroup
* Nikkei to trade 9,500-9,800 this week - analyst
* Tokyo Elec up by daily limit, volume accounts for 10% of total trade
* Nomura cuts Topix target
By Ayai Tomisawa and Antoni Slodkowski
TOKYO, April 11 (Reuters) - Japan's Nikkei average slipped on Monday after Citigroup slashed ratings on major automakers to "sell" and was set to trade in a tight range before earnings announcements at the end of the month reveal the full impact of the earthquake that hit the country on March 11.
Underscoring the cautious mood on the Tokyo bourse, trading volume dropped to the lowest level since the earthquake and tsunami with as few as 2 billion shares changing hands on the Tokyo Stock Exchange's main board, compared with the 2.6 billion shares traded daily on average last week.
Buying in post-quake outperformers, such as reconstruction- and oil-related stocks, helped the Nikkei stay above its closely watched 25-day moving average at 9,677. The average was pierced last Friday for the first time in over a month.
Despite coming off a one-month peak hit the previous session, the Nikkei has already recouped about two-thirds of the ground lost since the disasters, but analysts said from now on potential gains will likely be hard-won.
"The market will stay trapped in its recent range until the earnings season kicks off in early May," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, adding that traders will look for early clues about the damage to the global supply chain in U.S. corporate results such as Apple's, which are due to come out before Japanese earnings.
"But the real impact can only be fully priced in once we see the figures here. Until then the volumes will stay thin," he said.
The benchmark index closed down 0.5 percent or 48.38 points at 9,719.70 on Monday, while the broader Topix shed 0.1 percent to 852.34.
Immediate resistance looms at the Nikkei's 200-day moving average at 9,816, which the market has unsuccessfully tested twice since the quake.
Underscoring concerns over long-term impact of the quake on Japanese shares, Nomura Securities cut its Topix target for end-2011 to 1,000 from 1,100 in a report issued late last week.
AUTOS FALL
Automakers extended their heavy post-quake losses, with Toyota Motor Corp shedding 2.4 percent to 3,260 yen after it was cut to "sell" from "neutral" and its target share price slashed to 2,440 yen from 4,140 yen, according to the Citigroup report obtained by Reuters.
"We do not think the fall in earnings and slowness of the recovery have been fully priced in yet," analyst Noriyuki Matsushima wrote. The brokerage expects vehicle production to recover only in autumn.[ID:nL3E7FB0NC]
Nissan Motor Co dropped 2.4 percent to 697 yen after being cut to "sell" from "buy" and its target share price was almost halved to 650 yen. Honda shed 2.2 percent to 2,903 yen after being downgraded to "sell" from "buy". Its target share price was also nearly halved, to 2,470 yen.
Japan's top automakers plan to resume production at all domestic factories in stages starting on Monday, but output levels will be at half of original plans and depend on the availability of parts and power.[ID:nN08212730]
EARNINGS SETTING TONE
Analysts said the Nikkei benchmark is expected to trade between 9,500 and 9,800 this week although first-quarter U.S. corporate earnings kicking off this week might change that.
"If such companies as Alcoa cheer the market and provide evidence of a U.S. economic recovery, the Nikkei may top that range," said Yumi Nishimura, a senior market analyst at Daiwa Securities.
Aluminum company Alcoa Inc is scheduled to report first-quarter earnings later on Monday, and others reporting this week include JPMorgan Chase & Co , Bank of America Corp and Google Inc .
Shares of oil and gas developers Inpex Corp and Japan Petroleum Exploration Co (Japex) rose after U.S. benchmark oil futures hit their highest level in nearly 2-1/2 years on Monday, boosted by a weak dollar and the war in Libya.
Inpex rose 3 percent to 654,000 yen, while Japex gained 1.7 percent to 4,155 yen.
Shares of Tokyo Electric Power Co , the owner of Japan's stricken nuclear power plant, soared 19.1 percent to their daily limit for a second straight day in volatile trade on Monday to end the session at 500 yen.
Trade in Tepco, mostly driven by day-traders and speculators, accounted for as much as 10 percent of the total volume on the TSE's main board reaching 218 million shares.
The shares rallied 24 percent on Friday after Mizuho Securities set a target price for the stock at 900 yen, lower than its previous target but still more than double the level at that time, and rated it "outperform".
The biggest post-quake gainers, reconstruction-related stocks kept climbing, with contractor Kajima Corp gaining 1.8 percent to 231 yen and Shimizu Corp advancing 0.6 percent to 358 yen. The firms gained about 8 percent and 12 percent respectively after the quake, while the Nikkei lost some 7 percent.
Electronics conglomerate Toshiba Corp jumped 4.2 percent to 402 yen, after analysts at Deutsche Bank and MF Global said negative sentiment surrounding the company's nuclear business, triggered by the crisis at the Fukushima nuclear plant, had gone too far. (Editing by Chris Gallagher)