Asian equities decline after disappointing China data. The Uncertainty of US debt ceiling outcome is worrisome for the markets.
Asian stocks fall as Chinese industrial activity contracted for a second straight month
As industrial activity contracted for a second consecutive month on Wednesday, Asian equities fell, with Chinese markets leading losses. The general mood was tense prior to a vote to increase the U.S. debt ceiling.
Shanghai Composite and Shanghai Shenzhen CSI 300 indices in China both saw declines of 1% and 0.6. Leading to the blue-chip index reaching its lowest value in 6 months. The nation’s production sector contracted in May. According to official data, which decreased total turnover and suggested that the economic recovery that began earlier this year has slowed down.
Amid growing doubts about a rebound in Asia’s biggest economy, Chinese indices were likewise expected to end the month around 3.6% to 6% down. Than they had at the beginning of the month. They had essentially undone their year-to-date gains.
The Spill Over Effect
Chinese stock losses spread to Hong Kong, pushing the Hang Seng index down 2.5% to its lowest point in 6 months. The index was predicted to decline by roughly 9 percent in May.
Fears of deteriorating relations among Washington and Beijing weighed on Chinese markets after China rejected a request from the US for a summit involving defense officials.
Wider Asian markets were affected by China worries, especially countries with significant trade interactions with China. Taiwan Weighted index fell 0.5%, while Australia’s ASX 200 index fell 1.2 percent.
Data indicating a larger-than-anticipated increase in Australian inflation during April. Which suggests further hikes in interest rates by the central bank in the near future, also put pressure on the ASX 200.
While the larger TOPIX declined 1 percent after traders cashed in recent profits. Japan’s Nikkei 225 index slid 1.2%. Although both indices declined from 33-year peaks. Both were expected to rise 3.9% to 8 percent in May, thus becoming Asia’s top gainers during the month.
Through May, the Nikkei had experienced significant increases due to a good earnings season and anticipation of a dovish BoJ. Given that Japanese indices are near ranges that were reached during the boom of the 1990s. The surge may currently be stagnating.
Asian FX) As the Chinese economy’s recovery lags, the yuan drops to a 6-month bottom in Asia.
On Wednesday, many Asian currencies decreased, including the Chinese yuan dealing at a 6-month lo. Due to further indications of the country’s economic recovery’s slowness. In contrast, the US dollar strengthened before a vote on raising the U.S. debt limit.
Data revealed that output declined in May for the 2hd straight month and at a faster rate than in April. Sending the yuan down 0.3% and pushing it over the 7.1 mark to the very first time as of late Nov. The offshore yuan fell by 0.4 percent to 7.1160 versus the dollar, demonstrating the negative opinion that foreigners have of the Chinese currency.
Despite statistics showing that consumer inflation inched closer near 30-year peaks in April. The AUD slipped 0.4%. And the Taiwan dollar dropped 0.5%. Both currencies have significant trade relations with China.
On the other side, when consumer interest in safe havens increased due to the disappointing Chinese statistics. The US dollar strengthened in Asian trading. Both of the dollar index & dollar futures saw an increase of approximately 0.2% as they traded near Monday’s ten-week peaks.
