Japan’s Nikkei share average fell on Tuesday as weak corporate activity soured sentiment, while data from China suggested its economy was losing further momentum.

The Nikkei dropped 2.3 per cent to 18,458.52 points by mid-morning, with a technical support level seen at its 260-day moving average of 18,282.

Thirty of Topix’s 33 sub-sectors were in negative territory, with cyclical shares leading the declines.

Corporate spending

Japanese corporate capital expenditure increased 5.6 per cent in April-June from a year ago, slowing from the previous quarter and adding to signs of an economy struggling to recover from a slump.

“This is depressing because we are talking about a period before worries about a China-led slowdown in the global economy hit,’’ said Hikaru Sato, senior technical analyst at Daiwa Securities. “For this quarter and beyond, China’s cooling demand could hit our economy so it’s not looking good.’’

He also said that the sluggish corporate spending suggests that Japanese growth in the April-June quarter could be revised below forecasts later this month. The revised growth domestic product data will come out on Sept. 7.

China’s official PMI

China’s official Purchasing Managers' Index (PMI) fell to 49.7 in August from the previous month’s reading of 50.0, the weakest showing in three years.

Separately, the private Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) showed a final reading of 47.3 in August, the lowest since March 2009.

Investors dumped Toshiba Corp stock after it further delayed the released of its earnings for the year ended March, saying it had found new accounting errors. The stock dived as much as 4.9 per cent.

Morgan Stanley’s rating cuts on electronic components makers dragged down the sector, citing an uncertain outlook for demand for such products.

TDK Corp tumbled 4.6 per cent and took off a hefty 14 points from the Nikkei benchmark after the broker cut its rating to ‘equal-weight’ from ‘overweight’, citing falling demand for HDDs.

Mitsumi Electric stumbled 4.5 per cent to ‘underweight’ from ‘equal-weight’ saying that slack demand in China is likely to hit its sales of camera actuators for smartphones, its key earnings driver.

Securities stocks underperformed, with Nomura Holdings shedding 2.6 per cent and Daiwa Securities dropping 2.7 per cent.

Automakers were lower, with Honda Motor Co falling 2.5 per cent and Nissan Motor Co dropping 2.1 per cent.

The broader Topix dropped 1.7 per cent to 1,510.73 and the JPX-Nikkei Index 400 shed 1.8 per cent to 13,565.86.

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