Tokyo stocks down more than 3% in afternoon trade

TOKYO (AFP) - Tokyo stocks lost more than three per cent on Monday afternoon following sharp falls on Wall Street with weak China data also weighing on the market.

The benchmark Nikkei 225 index, which was down more than five per cent last week, lost 3.47 per cent, or 479.45 points, to 13,295.09, while the Topix index of all first-section shares fell 3.54 per cent, or 40.22 points, to 1,095.67.

"A major factor behind today's big decline was Friday's fall on Wall Street," Kenzaburo Suwa, strategist with Okasan Securities, told AFP.

"On top of that, Japanese shares are still in the middle of adjustment following the recent surge.

"The market is trying to find a short-term bottom, which has yet to be seen. Players are expected to remain cautious this week ahead of key economic indicators, notably US jobless figures."

The decline also came after HSBC said Monday China's manufacturing activity shrank more than first reported in May, confirming the first contraction in seven months.

The result was in stark contrast to the Chinese government's PMI result for May released Saturday, which came in better than April.

Separate data on Monday confirmed that Japanese firms remain cautious with capital investment falling in the first quarter of the year even as a decline in the yen has helped domestic firms become more competitive overseas and stoked confidence in the Japanese economy, the world's third-largest.

A quarterly survey by the finance ministry showed spending by firms was down 3.9 per cent from the same period a year earlier.

On Wall Street, the Dow Jones Industrial Average shed 1.36 per cent to close at 15,115.57 on Friday after a flurry of mixed indicators sparked volatile trade in the last session of the month.

The Commerce Department reported that consumer spending dropped by 0.2 per cent last month, the first monthly fall since May 2012 and a signal that growth slowed at the beginning of the second quarter.

Offsetting that was a jump in the Chicago area manufacturing PMI index to 58.7, its highest since March 2012, and the University of Michigan consumer confidence barometer, which rose to a better-than-expected 83.7, the highest since July 2007.

In forex markets, the dollar bought 100.46 yen, gaining from 100.37 yen in New York late Friday, while the euro was also stronger against the Japanese currency at 130.73 yen from 130.44 yen last week.