Japanese stocks skidded on Monday morning, hurt by soft domestic industrial output data and concerns the US 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 per cent to 18,859.02 in midmorning trade, snapping a three-day winning streak. For the month, the benchmark has dropped 8.2 per cent so far and is poised for its biggest monthly decline since January 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.

PMI, manufacturing data

Investors are keenly awaiting the Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) and US manufacturing data due out on Tuesday. This will be followd by Friday’s crucial US jobs data.

Earlier on Monday, data showed Japan’s industrial output unexpectedly fell 0.6 per cent 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.

Fed rate hike

The prospect of an imminent US rate hike was also back on the table after Fed Vice-Chairman Stanley Fischer, speaking at the central bank’s 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 US 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 per cent and Mitsubishi Estate dropping 1.9 per cent. Mitsubishi UFJ Financial Group shed 1.9 per cent while Mizuho Financial Group slid 1.4 per cent.

Bucking the weakness, Suzuki Motor Corp jumped as much as 4.6 per cent 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 per cent to 1,540.66 and the JPX-Nikkei Index 400 declined 0.7 per cent to 13,844.90.

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