Japanese stocks skidded on Monday morning, hurt by soft domestic industrial output data and concerns the U.S. Federal Reserve might yet raise interest rates next month even as anxiety over a China-led global economic slowdown persists.
The Nikkei fell 1.5 percent to 18,859.02 in midmorning trade, snapping a three-day winning streak. For the month, the benchmark has dropped 8.2 percent so far and is poised for its biggest monthly decline since Jan. 2014.
For the week, analysts said that the Nikkei may hover around the 19,000-mark depending on how global data, and financial markets performance, play out.
Investors are keenly awaiting the Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) and U.S. manufacturing data due out on Tuesday. This will be followd by Friday’s crucial U.S. jobs data.
Earlier on Monday, data showed Japan’s industrial output unexpectedly fell 0.6 percent in July, in a sign that weak overseas demand and high inventories are weighing on production.
“Weak demand from China is expected to continue to weigh on Japan’s production going forward so China worries may persist,” said Masaru Hamasaki, head of market & investment information department at Amundi Japan.
The prospect of an imminent U.S. rate hike was also back on the table after Fed Vice Chairman Stanley Fischer, speaking at the central bank’ conference in Jackson Hole, Wyoming, said recent volatility in global markets could ease and possibly pave the way for a rate hike.
Investors are concerned that a U.S. rate hike next month could rattle asset markets globally at a time of volatility in Chinese stocks and concerns slowing growth in China could dent the global economy.
Twenty-eight of the broader Topix’s 33 subsectors fell.
Real estate and banking shares led the declines, with Mitsui Fudosan falling 2.2 percent and Mitsubishi Estate dropping 1.9 percent. Mitsubishi UFJ Financial Group shed 1.9 percent while Mizuho Financial Group slid 1.4 percent.
Bucking the weakness, Suzuki Motor Corp jumped as much as 4.6 percent as investors cheered the settlement of a years-long dispute between the Japanese automaker and Volkswagen AG in an international arbitration court.
Fujitsu Ltd also outperformed after Goldman Sachs raised the rating to ‘buy’ from ‘neutral’ and added the stock to its “conviction” list, saying that the correction in its stock price is overdone.
The broader Topix dropped 0.6 percent to 1,540.66 and the JPX-Nikkei Index 400 declined 0.7 percent to 13,844.90.