Asian Markets Kick Off with Caution after Soft Economic Data

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Asian markets review

Asian stock markets started the week on a cautious step following the soft economic data from China and Europe added to evidence of cooling global growth and reinforced anxiety over the broadening impact of international trade frictions.

MSCI’s broadest index of Asia-Pacific shares excluding Japan slipped 0.1 percent in early Monday trade, headed by the losses in China and Hong Kong. The CSI 300 of Shanghai and Shenzhen share index slumped 0.9 percent.

Meanwhile, Japan’s Nikkei was higher 0.05 percent while US stock futures inched up 0.2 percent. Taiwan also gained 0.3 percent.

Last Friday on Wall Street, the S&P 500 dropped 1.91 percent to 2,599.95, marking its lowest close since the 2nd of April.

The benchmark has slipped 11.3 percent from its September 20 record close, which was its worst performance since it plummeted more than 14 percent between May 2015 and January 2016.

The largest drag was Johnson & Johnson, which plunged 10 percent for its biggest drop since 2002, after a report said that the pharmaceutical giant knew that its baby powder was contaminated with cancer-causing asbestos.

The market’s plummet also emphasized a worsening global economic outlook, with the most recent evidence of slackening momentum coming from China and Europe.

HIS Markit’s Flash Composite Purchasing Managers’ Index slumped to 51.3, its weakest since November 2014, from a final November reading of 52.7. That was much lower than the most pessimistic forecast in a survey where the median expectation was for a decent rise to 52.8.

The poll showed that the euro zone businesses finished the year in a downbeat tone, expanding their operations at the slowest pace in more than four years as new orders growth all but dried up, dented by trade tensions and violent protests in France.

The discouraging economic news came following the report from China that showed a batch of soft economic indicators, with retail sales growing at their weakest pace since 2003 and industrial output rising the least in almost three years.

China’s economy has been losing steam in past few quarters as a multi-year government campaign to curb shadow lending put increasing financial strains on companies in a blow to production and investment.

Investors are now looking to a major speech from President Xi Jinping on Tuesday to mark the 40th anniversary of China’s reform and opening up.

In the currency markets, the dollar was steady after reaching a 19-month high against a basket of six other major currencies on Friday as the US economy appeared to be in better shape than others.

dollars

US retail sales not including automobiles, gasoline, building materials, and food services gained 0,9 percent  last month after an upwardly revised 0.7 percent increase in October.

Meanwhile, the US Federal Reserve is expected to raise interest rates at its two-day policy meeting that is set to start on Tuesday, further enhancing the dollar’s yield attraction.

At the same time, many market players also expect the Fed to lower its projections for future interest rate hikes given increasing headwinds to the economy.

“You could argue that if the Fed lower estimates, that could be taken as a further sign of economic slowdown,” said Hirokazu Kabeya, who is chief global strategist at Daiwa Securities. “But the given fragile sentiment, I would think it would be more dangerous if the Fed sticks to the view that it would raise rates three times next year.”

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