Asian shares jolted by grim Chinese data, growth risks

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TOKYO – Asian shares tumbled on Friday after China reported a set of weak data, fanning fresh worries of a slowdown in the world’s second-biggest economy and leaving investors fretting over the wider impact of a yet unresolved Sino-U.S. trade dispute.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.3 percent. Japan’s Nikkei, also dragged down by the country’s weak tankan sentiment index, dropped 2.0 percent.

China’s benchmark Shanghai Composite and the blue-chip CSI 300 closed down 1.5 percent and 1.7 percent, respectively, and Hong Kong’s Hang Seng was off 1.5 percent.

Financial spread-betters expect London’s FTSE Frankfurt’s DAX and Paris’s CAC to fall between 0.7 and 0.8 percent when they open.

China’s November retail sales grew at the weakest pace since 2003 and industrial output rose the least in nearly three years as domestic demand softened further, underlining rising risks to the economy as Beijing works to defuse a trade dispute with the United States.

A Chinese statistics bureau spokesman said the November data showed downward pressure on the economy is increasing.

The data “means that the worst is yet to come and policymakers will be very worried, particularly with consumption growth falling off a cliff,” said Sue Trinh, head of Asia FX strategy at RBC Capital Markets in Hong Kong.

“So I expect further support measures including rate cuts will come in coming weeks, although these data would indicate measures to date aren’t really working.”

The Chinese yuan weakened 0.15 percent to 6.8888 per dollar in offshore trade following the data.

“Although hopes of progress in U.S.-China talks and cheap valuations are supporting the market for now, we have lots of potential pitfalls,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

“If U.S. shares fall below their triple bottoms hit recently, that would be a very weak technical sign.”

Overnight on Wall Street, the S&P 500 ticked down 0.02 percent to 2,650, not far from its 6-1/2-month closing low of 2,633 touched on Nov. 23, while the Nasdaq Composite dropped 0.39 percent.

U.S. corporate earnings due next month could throw a spotlight on the impact from the U.S. tariffs on imports from China, while there is risk of a government shutdown and further political stalemate in a divided U.S. congress, Kuramochi added.

In the currency market, the euro stuck in its well-worn $1.13-$1.14 range over the past few days, a day after the European Central Bank ended its 2.6 trillion euro bond purchase scheme but pledged to continue reinvesting maturing bonds -thereby avoiding shrinking its balance sheet- for an extended period of time.

The common currency last changed hands at $1.1352.

“With Thursday’s decision, the ECB is only taking very lightly the foot off the accelerator of monetary policy, which is by no means a real normalization of monetary policy,” said Oliver Eichmann, co-head of EMEA fixed income at DWS in Frankfurt.

Sterling’s rally fizzled as signs that the British parliament was headed towards a deadlock over Brexit prompted traders to take profits from its gains made after Prime Minister Theresa May had survived a no-confidence vote.

The European Union has said the agreed Brexit deal is not open for renegotiation even though its leaders on Thursday gave May assurances that they would seek to agree a new pact with Britain by 2021 so that the contentious Irish “backstop” is never triggered.

The pound fell 0.4 percent to $1.2615, on track to post its fifth consecutive week of losses. It was down 0.9 percent so far this week.

The dollar stood at 113.57 yen, flat on the day but above this week’s low of 112.245 set on Monday.

The kiwi fell as much as 1.0 percent to $0.6861 after the central bank said it was considering almost doubling the required capital banks would need to hold to bolster the financial system’s capacity to handle any shocks.

Oil prices gave up some of their Thursday’s gains following inventory declines in the United States and expectations that the global oil market could have a deficit sooner than they had previously thought.

U.S. crude futures edged down 0.6 percent to $52.27 per barrel and Brent crude slipped 0.8 percent to $60.94, after both gained more than 2.5 percent on Thursday.

A rash of bomb threats were emailed on Thursday to hundreds of businesses, public offices and schools across the United States and Canada demanding payment in cryptocurrency, but none of the threats appeared credible, law enforcement officials said. – Reuters

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