By Aiko Hayashi

TOKYO (Reuters) - The Nikkei average fell 1.2 percent to a two-week closing low on Monday as carmakers slid on weak U.S. auto sales data, with Nissan Motor also hit by a drop in profits.

Global demand stocks such as Nippon Steel slid along with automakers as investors moved away from stocks that reflect the state of the global economy to defensive issues, said Takashi Kamiya, chief economist at T & D Asset Management.

"As the stock market moves to factor in a slowdown in the global economy, the focus is shifting to defensive stocks from stocks that mirror the global economy," he said.

"The global economy, led by the United States, is getting weaker than previously expected and worries about Japanese corporate earnings in the latter half of this year are increasing."

The benchmark Nikkei shed 161.41 points to end at 12,933.18, its lowest finish since July 18.

The broader Topix fell 1.9 percent to 1,248.25.

U.S. auto sales plunged to a 16-year low in July, led by a 27 percent drop at General Motors as high gas prices and tight credit sent the industry into a tailspin.

"The sharp drop in U.S. auto sales is probably the biggest reason for the fall in auto stocks today," said Yoshinori Nagano, chief strategist at Daiwa Asset Management.