Pessimism arises from East as Chinese manufacturing slumps
BANGKOK - The Associated Press
A worker walks past new excavators at a Lonking factory in Shanghai. The China Federation of Logistics and Purchasing’s index fell 0.1 percentage point to 50.1 in July, just above the 50 level, signifying expansion. REUTERS photoAsian stock markets mostly fell yesterday after four days of gains as China’s manufacturing slowed despite government stimulus efforts.
Global markets have been buoyant since July 26 on hopes that policymakers will back powerful new measures to battle Europe’s debt crisis after European Central Bank (ECB) chief Mario Draghi vowed to do what it takes to keep the euro currency union intact.
But sentiment in Asia took a hit after an expected improvement in China’s manufacturing failed to materialize. Doubts have also grown about whether the ECB’s bold talk will translate into definitive action. As so often before in the debt crisis, the risk is that Europe’s leaders overpromise and under-deliver.
The U.S. Federal Reserve was set to finish a two-day meeting yesterday. The ECB meets today.
ECB move under spotlight
“A bit of doubt is starting to creep in after the monster rally we have seen over the past week,” said IG Markets strategist Stan Shamu in a commentary. “Concerns over how aggressive the ECB will be in backing Mario Draghi’s pledge to save the euro seem to be keeping some investors at bay ahead of the ECB meeting.”
China’s manufacturing remained weak in July, according to surveys released yesterday, and analysts said weakening export demand pointed to the need for more efforts to revive growth in the world’s second-biggest economy.
The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers’ index, or PMI, fell 0.1 percentage point to 50.1 in July, the slowest growth in eight months and just above the 50 level signifying expansion.
Japan’s Nikkei 225 stock average closed down 0.6 percent at 8,641.85 while Hong Kong’s Hang Seng added 0.1 percent to 19,820.38. Australia’s S&P/ASX 200 lost 0.2 percent to 4,262.80. South Korea’s Kospi shed 0.1 percent to 1,879.93. Markets in Indonesia and India also fell while the Shanghai Composite gained 0.9 percent to 2,123.36.
India’s factory sector activity in July, meanwhile, grew at its most sluggish pace for eight months, a survey showed yesterday, underlining the weakening state of Asia’s third-largest economy.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI), a measure of factory output, slid to 52.9 in July from 55.0 the previous month -- the softest reading since last November -- on the back of weakening orders.
While a reading above 50 still indicates expansion, the figure marked the biggest one-month drop since September 2011.