* Banks, financials up; track gains in European, U.S. peers
* Hi-tech issues soft on weak Seagate, Intel outlooks
* Foreigners may shift to mid-to-small Japan stocks-analyst
* Resistance seen at Ichimoku cloud's tenkan line at 10,046
* Autoparts makers sold on alleged price-fixing
By Ayai Tomisawa and Antoni Slodkowski
TOKYO, July 21 (Reuters) - The Nikkei stock average on Thursday held on to most of the strong gains made the day before, bolstered by hopes that a debt deal for Greece will be struck at an EU leaders' summit but capped near 10,000 by worries about the U.S. debt ceiling.
Banks and insurers led advancers after their U.S. peers posted strong gains, boosted by a jump in US Bancorp shares and after PNC Financial Services Group Inc's second-quarter net income beat analysts' estimates.
But hard-drive parts makers Nidec Corp and TDK Corp slid after market leader Seagate Technology's forecast for its July-September quarter missed expectations and Intel Corp trimmed its forecast for 2011 computer sales, warning of softness in mature markets.
"Most investors are sticking to the sidelines today ahead of the EU summit and as nothing has been decided yet on the U.S. debt ceiling issue," said Mitsuo Shimizu, deputy general manager at Cosmo Securities.
The benchmark Nikkei average was down 0.1 percent at 9,992.92 in early afternoon trade. On Wednesday, the index rose 1.2 percent.
The broader Topix shed 0.2 percent to 859.09.
"The index may stay near the 10,000 line for the next month or two," said Masanaga Kono, a chief strategist at Amundi Japan.
He said that despite expectations for a recovery in production after the March earthquake, manufacturers will likely remain cautious about their outlooks when they begin reporting April-June results next week.
"Their production may be recovering, but there are persistent concerns about the strong yen," Kono said.
He added that foreign investors would likely favour small-to-mid sized companies with attractive valuations over global cyclicals such as bellwether exporters, because "global small stock funds that included many of these Japanese companies in the April-June quarter seem to have outperformed."
As investors awaited the outcome of the EU and U.S. talks, cash and futures markets volumes fizzled. The number of shares exchanged on the main board by early afternoon reached a lukewarm 1.3 billion, suggesting the day's total would come below the last week's daily average of 1.7 billion issues.
YEN STRENGTH
Strong gains in the Nikkei were also prevented by technical resistance at 10,046, where the Ichimoku cloud's tenkan line on the daily chart stopped the benchmark's rally on Wednesday. Immediate support was seen at the 200-day moving average at 9,908.
German Chancellor Angela Merkel and France's President Nicolas Sarkozy reached a joint position late on Wednesday over a new bailout plan for Greece that will include participation of the banking sector, the French delegation said.
The White House shifted gears on Wednesday and signalled that President Barack Obama could support a short-term increase in the U.S. borrowing limit as long as it is part of a broader deficit reduction deal.
Exporters also came under renewed pressure after the dollar softened around 0.4 percent compared to the previous day's close to trade at 78.70 yen , not far from a 4-month low hit last week.
Toyota Motor shed 0.6 percent to 3,305 yen while Sony Corp dropped 0.9 percent to 2,074 yen.
But Mitsubishi UFJ Financial Group , Japan's biggest bank by assets, advanced 1.3 percent to 394 yen, while Sumitomo Mitsui Financial Group rose 0.5 percent to 2,442 yen.
Among PC-component makers, Nidec, the world's largest maker of small motors for HDDs, dropped 2.4 percent to 7,670 yen and TDK, a maker of HDD heads, declined 2.4 percent to 4,270 yen.
Some meat packers lost in heavy trade after Kyodo news agency reported that more than 1,000 beef cattle that ate feed contaminated with radioactive cesium have been shipped all over Japan from Fukushima and other prefectures.
Itoham Foods fell 2.5 percent to 311 yen.
Mitsuba Corp dropped 7.8 percent to 735 yen in heavy trade, while Calsonic Kansei fell 2.4 percent to 496 yen after a source told Reuters on Wednesday that Japan's Fair Trade Commission is investigating seven major auto parts makers, including Mitsuba and Calsonic, on suspicion they formed a price-fixing cartel. (Additional reporting by Mayumi Negishi; Editing by Chris Gallagher)