* Oil stocks, trading houses underperform on weak commodity prices
* Airlines outperform on hopes for cheaper fuel prices
By Ayai Tomisawa
TOKYO, Dec 8 (Reuters) - Japan's Nikkei share average fell on Tuesday, with sharp declines in oil and commodity shares offsetting news that the economy had dodged a recession in the third quarter.
The Nikkei .N225 was down 1.0 percent at 19,494.24 points by midmorning, erasing early gains.
Oil stocks were battered after crude prices remained near 7-year lows in early Asian trading on Tuesday as OPEC continues to pump near record oil to defend market share.
Inpex Corp 1605.T tumbled 5.4 percent and Japan Petroleum Exploration 1662.T shed 3.5 percent.
Other commodity stocks such as trading houses fell on weakness in oil, iron ore and metal prices. urn:newsml:reuters.com:*:nL3N13W34P Mitsubishi Corp 8058.T dropped 2.3 percent, Sumitomo Corp 8053.T shed 2.4 percent and Mitsui & Co 8031.T declined 2.5 percent.
"Global cyclical shares which had risen lately are being unloaded because investors grew concerned," said Yoshihiro Okumura, general manager at Chibagin Asset Management.
Such cyclical shares as chip-making equipment firms and electronics companies were sold, with Advantest Corp 6857.T shedding 2.6 percent and Panasonic Corp 6752.T declining 2.5 percent, both falling to two-week lows.
Financials were also hit, with Mizuho Financial Group 8411.T dropping 1.6 percent, Sumitomo Mitsui Financial Group 8316 falling 1.0 percent and Nomura Holdings 8604. sliding 0.9 percent.
On the other hand, airline shares outperformed on hopes for cheaper fuel prices. ANA Holdings 9202.T rose 0.9 percent and Japan Airlines Co 9201.T gained 0.7 percent.
Better-than-expected revised growth data for the third quarter failed to help sentiment. Japan's economy avoided a technical recession in the third quarter with the initial estimate of a contraction revised to an annualised expansion of 1.0 percent.
Analysts said investors were looking to the U.S. Federal Reserve's policy setting meeting next week for the next catalyst.
"The market has priced in a rate increase by the Fed, but what it focuses on is the pace of rate increases in the future and any hint on that will likely set the market direction," said Nobuhiko Kuramochi, a strategist at Mizuho Securities.
The broader Topix .TOPX dropped 1.0 percent to 1,569.34 and the JPX-Nikkei Index 400 .JPXNK400 declined 1.0 percent to 14,124.56. (Editing by Kim Coghill)