TOKYO The Nikkei share average fell to its lowest close in three weeks on Monday, hurt by downbeat economic data from Japan and China as well as a smattering of profit warnings from local companies like shipper Nippon Yusen KK (9101.T).
But eAccess Ltd 9427.T, jumped 26 percent after the Nikkei business daily said Softbank Corp (9984.T), Japan's No. 3 mobile operator, would buy its smaller rival through a share swap in a deal valued at just under 200 billion yen ($2.6 billion).
Trade in eAccess was later halted, while Softbank fell 1.7 percent.
Manufacturing activity in China continued to contract in September, according to the official purchasing managers' index, while business sentiment for big Japanese manufacturers worsened in the last quarter, the central bank's tankan survey showed.
"Sentiment in Japan was more pessimistic than expected and could yet worsen, China's PMI wasn't great, we've got the United States' ISM tonight; it's a perfect environment to sell," said Fumiyuki Nakanishi, manager of investment and research at SMBC Friend Securities.
The Nikkei .N225 shed 0.8 percent to 8,796.51, breaking below its 75-day moving average at 8,866.55 and slumping to its lowest close since September 6.
Nippon Yusen lost 0.7 percent after cutting its first-half operating forecast 18 percent from an earlier estimate, blaming weak business conditions.
Daido Steel Co Ltd was another company warning on profits, slashing its prediction for first-half operating profit 36 percent due to securities valuation losses and weak steel shipments. The stock slid 5.8 percent.
The revisions did not bode well for the U.S. corporate earnings season, which begins next week.
"The Nikkei could easily slip right down to 8,500 without much resistance if we see a lot of downward revisions in the U.S.," said Masayuki Otani, chief market analyst at Securities Japan.
The index last struck below 8,500 in early July, before scrambling back above the 9,000 level in August.
But it lost 1.6 percent on the quarter that ended Friday, hurt by fears of dwindling revenues for Japanese firms in China due to a general slowdown and anti-Japan sentiment triggered by a territorial dispute.
"Macro figures are not overly impressive," a trader at a foreign brokerage said. "We've (also) got some auto sales expected to come through weak."
Toyota Motor Corp (7203.T) dropped 1.7 percent and Nissan Motor Co (7201.T) lost 1.5 percent.
SOFTBANK SAGS, UTILITIES UP
The utilities sector .IENPNG.T was the best performing subindex with a gain of 2.6 percent, after Electric Power Development Co Ltd (J-Power) (9513.T) said it will resume construction of its Ohma nuclear power plant in northern Japan, which was suspended due to the accident at the Fukushima nuclear power plant last year.
It was the first concrete sign that the government will go ahead with already approved nuclear plants and the stock gained 5.9 percent.
Other utilities also benefitted from improved sentiment for the sector, although the sector is still down 18.6 percent down for the year to date. Tohoku Electric Power Co Inc (9506.T), Hokkaido Electric Power Co (9509.T) and Shikoku Electric Power Co (9507.T) rose between 5.8 and 6.5 percent on Monday.
Chemicals maker Nippon Shokubai Co Ltd (4114.T) slumped 13.3 percent to hit a more than 17-month low after Japanese media said two acrylic acid storage tanks and one toluene tank at the company's plant in western Japan exploded on Saturday afternoon.
The broader Topix .TOPX index dropped 0.7 percent to 732.35 in thin trade, with volume at just 85.5 percent of the average over the past 90 days. Some 1.37 billion shares changed hands, the lowest level since September 13.
($1 = 77.8000 Japanese yen)
(Additional reporting by Dominic Lau; Editing by Edwina Gibbs)