(Reuters) - Japan's Nikkei average shed 1.5 percent on Monday after Standard & Poor's stripped France of its prized triple-A status and cut the credit ratings of eight other euro zone countries, dealing another blow to the region's efforts to end the debt crisis. Adding to the gloom, negotiations between Greece and private creditors on a debt swap deal broke down, raising the risk of a Greek default in March when massive bond payments are due. Construction companies, however, were in demand as investors remained bullish that the sector would benefit from Japan's reconstruction spending. The sector .ICNST.T outperformed the broader market last year. Taisei Corp (1801.T), Kajima Corp (1812.T) and Obayashi Corp (1802.T) were up between 0.8 and 1.1 percent on Monday, despite their relatively high valuations. The three companies carried a 12-month forward price-to-earnings ratio of between 14.4 and 16.3, data from Thomson Reuters Datastream showed. That compared with the construction sector's 11.6 and the broader Topix's .TOPX 11.4. Exporters fell as the euro zone news pushed the euro to its lowest in almost 11 years versus the yen and a 17-month low against the dollar. TDK Corp (6762.T) eased 1.4 percent, Canon Inc (7751.T) dropped 2.2 percent, Konica Minolta Holdings Inc (4902.T) fell 2 percent and Toyota Motor Corp (7203.T) lost 2 percent. "It's difficult to see the euro snapping back and gaining any time soon, which creates worries for major exporters," said Ryota Sakagami, chief strategist at SMBC Nikko Securities. The Nikkei average .N225 was down at 8,371.40 by the midday break, back below its 25-day moving average near 8,467 after closing above the technical level on Friday. But it was above the 61.8 percent retracement level of its rally from late November to early December near 8,364. Financials were also came under pressure on concerns that the deepening euro zone sovereign debt turmoil would lead a banking crisis. Both Sumitomo Mitsui Financial Group (8316.T) and Mitsubishi UFJ Financial Group (8306.T) shed 2.1 percent. The Topix fell 1.5 percent to 723.94, and volume on the index by midday was 47 percent of its full daily average for the last 90 days. "The Nikkei's drop today is bigger than I expected, but I do think that the downside is limited for now," said Toshiyuki Kanayama, senior market analyst at Monex Inc, adding that the markets had expected the downgrades since December. "But without seeing market reaction in U.S. overnight it will be difficult for investors to buy." Scandal-hit Olympus Corp (7733.T) was down 3 percent. An industry newspaper said Toshiba Corp (6502.T) was set to propose an equity tie-up with the scandal-hit camera and medical equipment maker. Toshiba, which denied the report, lost 2.6 percent.

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