China growth fears in focus
Market focus was on HSBC’s flash estimate of its China July purchasing managing index (PMI). The figure came in at 47.7, slipping further below the 50-mark that divides expanding activity in the sector from a contraction. Analysts attributed part of the weakness to last month’s rise in money market rates, which triggered a liquidity crunch and reduced the amount of credit available to manufacturers.
Experts said the weak number won’t fuel speculation of possible monetary stimulus since the government has expressed willingness to tolerate slower growth in an effort to rebalance the economy.
“We think there’s very little chance China will do some kind of mega-stimulus. The leadership understands that it was effectively the direct result of the 4 trillion renminbi package they did back in 2009 that created the property market bubble & all the associated socio-political tensions that resulted in 2010. And they are absolutely insistent on not repeating those mistakes,” said Michael Kurtz, global head of equity strategy, Nomura.
Shanghai slips 0.5%
China’s benchmark stock index retreated from the previous day’s 2 percent rally, falling below the 2,030 mark on fears of a slowing economy.
Financials led the declines with brokerages Founder Securities and Haitong Securities down 1.5 percent while mid-sized lender Minsheng Bank lost nearly 2 percent.
Immediately following the factory activity data, Beijing announced that it will push for mergers and restructuring of companies such as steel, cement, aluminium and and shipbuilders in a bid to tackle overcapacity. The move underlined Tuesday’s remarks by Chinese president Xi Jinping, where he emphasized the government’s determination to restructure the economy.
Sydney up 0.4%
Australia’s benchmark index crossed the 5,030 mark to hit its highest levels since May 24 thanks to a rally in resources. Atlas Iron added 5.4 percent after reporting a 25 percent increase in fiscal year 2013 iron ore shipments while Medusa Mining and Panoramic Resources rose over 6 percent each.
The Australian dollar fell back to the $0.92 handle on the back of China’s weak manufacturing figures just minutes after benign domestic inflation data saw the currency spike to a one-month high of $0.9317.
Consumer prices rose 2.4 percent in the second-quarter from a year earlier, just below economist expectations for a 2.5 percent gain. The lower-than-expected figure increased the chances of an interest-rate cut at the Reserve Bank of Australia’s (RBA) August meeting. Earlier this month, the RBA said that a diminishing inflation outlook would be a key factor in it’s decision to ease policy.
“Since the rate cut in May this year, more and more dovish analysts have been crying foul that the RBA has started to jawbone again because inflation is stagnating and the non-mining economy is drowning,” wrote Evan Lucas, market strategist at IG in a note.
Nikkei down 0.7%
Japanese stocks pulled back as the yen continued to trade on the stronger side of the 100-level against the dollar. A stronger currency weighs on exporter stocks as it reduces the value of their repatriated earnings. Market heavyweights Softbank, Fast Retailing and Fanuc were lower by 1 percent each.
(Watch now: Nikkei to trade between 18,000-21,000)
Also weighing on sentiment was weaker-than-expected June trade data. Exports rose for a fourth straight month in June, up 7.4 percent from a year earlier but missing market expectations for a 10.3 percent gain.
“The scene behind [the export data] could be partially explained by the fact that the share of USD settlement is so much more for import than export, meaning that yen’s depreciation is a factor to contribute more to increasing import value than export,” wrote analysts at Credit Agricole in a note.
Apple suppliers Japan Aviation Electronics jumped 1 percent following better-than-expected earnings from the Cupertino giant. Chip-equipment maker Advantest tanked 3.5 percent after the Nikkei newspaper reported that its operating loss is expected to widen to $30 million for the April-June quarter.
Kospi above 1,900
South Korea’s benchmark index crossed the 1,900 level for a second straight session as domestic exporters benefited from the yen’s strength. Automaker Hyundai Motor added half a percent.
Apple component suppliers also rose, with memory chip makers LG Display, SK Hynix and display maker Samsung SDI higher by over 1 percent each.
Meanwhile, tech giant LG Electronics jumped 2 percent ahead of posting second-quarter results later in the day.
— By CNBC.com’s Nyshka Chandran. Follow her on Twitter @NyshkaCNBC
Source Article from http://www.cnbc.com/id/100908514
