The Asia-Pacific region experienced broad market declines on Monday, driven by a global sell-off and disappointing economic data from Japan and China. The Nikkei 225 index led the regional losses, with investors responding to weaker-than-expected U.S. job data and China’s inflation report. Japan's revised GDP figures and the strengthening yen have further complicated the outlook for Japanese equities. Semiconductor and automotive stocks faced significant selling pressure, while a potential takeover bid boosted Seven & i Holdings. Below is a breakdown of the key developments impacting the markets.

Nikkei 225 Falls Amid Global Market Weakness

Nikkei 225 stocks dropped nearly 1.2% after the lunch break, with broader market sentiment weighed down by a sell-off in global markets. The decline in Japanese equities follows Friday's weaker-than-expected U.S. nonfarm payrolls report, which saw only 142,000 jobs added, missing the 161,000 estimate. While U.S. Futures showed some signs of firmness, trading up 0.3%, they were not enough to offset the negative momentum in Asia-Pacific markets.

Japan’s Revised GDP Falls Below Expectations

Japan's second-quarter GDP growth came in at 2.9% on an annualized basis, falling short of the 3.2% economists had predicted. This weaker-than-expected figure also came in lower than the 3.1% advance reading. The slowdown in GDP growth limits the Bank of Japan's ability to pursue interest rate hikes, constraining the country's broader economic recovery. Toshiyuki Kanayama, a senior market analyst at Monex, noted that the strong yen and weakness in U.S. markets are further contributing to investor caution in Japan.

China's CPI Growth Misses Expectations

Adding to the regional downturn, China's inflation rate grew by only 0.6% year-on-year, below the 0.7% forecasted by economists polled by Reuters. On a month-on-month basis, the Consumer Price Index (CPI) rose 0.4%, also missing expectations of a 0.5% increase. The underwhelming inflation figures from China point to weaker domestic demand, putting pressure on Asia-Pacific markets as traders reassessed growth prospects in the region's largest economy.

Semiconductor and Automotive Stocks Face Steep Losses

Japan’s semiconductor sector was particularly hard hit, with Tokyo Electron plunging 5.77% to 20,730 yen and Advantest falling 5.85% to 5,525 yen. The sell-off in semiconductors comes amid broader concerns about slowing global demand and weakening sentiment in technology stocks. Meanwhile, automakers also saw steep losses, with Toyota dropping 3.14% to 2,501.5 yen and Honda down 3.47% to 1,474.5 yen. The strong yen has weighed on export-driven sectors, further aggravating the outlook for these companies.

Seven & i Holdings Rises on Potential Takeover News

In contrast to the broader market decline, Seven & i Holdings jumped 2.84% to 2,194 yen. Bloomberg reported that Canadian retail giant Alimentation Couche-Tard remains highly focused on finalizing a takeover deal for the Japanese company, which owns the 7-Eleven convenience store chain. The potential acquisition has sparked investor interest, making Seven & i one of the few stocks in positive territory during Monday’s trading.

Outlook: Risk-Off Sentiment Dominates Asian Markets

Market sentiment in Asia remains cautious as traders monitor global macroeconomic data and currency movements. Kathy Lien, managing director of FX strategy at BK Asset Management, noted that yen traders are watching equities closely, with the yen carry trade expected to unwind amid growing risk-off sentiment. Lien also warned of potential periods of aggressive selling in equities throughout the month. Investors will continue to assess the strength of the U.S. labor market and further data from China as key drivers of short-term market performance.

As global markets digest mixed economic signals, Japan’s markets may face further volatility, particularly if U.S. equities remain under pressure. In the meantime, traders are advised to remain cautious amid the ongoing uncertainty.