Japan's Nikkei on course for worst month since March 2020

TOKYO, Sept 30 (Reuters) - Japanese stocks were set on Friday for their worst month since the COVID-19 pandemic first rocked markets two and a half years ago, after falling 1.67% in the morning session.

The Nikkei share average dropped below the 26,000 psychological barrier, shedding 6.19% so far in the month - its biggest decline since March 2020. The broader Topix fell 1.45% and also looked set for its worst month since March 2020.

Japanese markets tracked losses on Wall Street, with all three major U.S. stock indexes falling sharply overnight on heightened fears of a recession and a report that Apple Inc has cancelled a planned boost in iPhone 14 production.

“Yesterday’s news about Apple suspending its production increase caused the market to factor in a global recession,” said Takashi Nakamura, a senior strategist at Tokai Tokyo Research Institute.

“Even if the economy is expected to improve in Japan, overseas trends will make it difficult for investors to buy Japanese stocks alone.”

“I think the falls in U.S. stocks were an overreaction,” said Eiji Kinouchi, chief technical analyst at Daiwa Securities, who believes the same could be true of Japan, citing a gap between supply and demand at the end of the month.

Every sector on the Nikkei fell except real estate, which gained 0.17%. Of the index’s 225 constituents, 184 declined, 37 advanced, and four traded flat.

The two best performers on the Nikkei were Unitika Ltd , up 4.81%, and Oki Electric Industry Co Ltd, up 3.69%, as investors adjusted positions. Both stocks are set to be removed from the index after this week.

Automakers were the worst performers, with Mazda Motor Corp falling the most at 7.49%. Mitsubishi Motors Corp , Subaru Corp, and Nissan Motor Co Ltd were next.

Clothing giant and Uniqlo parent company Fast Retailing Co Ltd weighed on the index the most, falling 3.44%. (Reporting by Sam Byford and Tokyo markets team; Editing by Subhranshu Sahu)