Global Markets Pare Gains
By Kenan Machado
Tepid economic data from China sent key Asian stock indexes lower on Thursday, reversing early gains as investors took profit from the strong rebound at the start of the week.
Business activity in the world's second-biggest economy slowed further last month, falling short of expectations. It will likely spark fresh discussion on the deceleration of the country's economy after a strong first half.
The slowdown could temper hopes of a global ' reflation trade' as well as demand for commodities, both crucial for export-dependant economies in the region, analysts say.
Japan's Nikkei Stock Average and the Shanghai Composite Index reversed gains after the release, with the Nikkei last off 0.3% and the Shanghai index down 0.2% in the morning session.
In Australia, the S&P/ASX 200 was off 0.2% after being flat for much of early trading, despite an upbeat domestic jobs report. Elsewhere, Hong Kong's Hang Seng Index was off 0.4% at the midday break, though Korea's Kospi was up 0.1%. In Thailand, the SET Index gained 0.4%, moving close to hitting a 23-year high. While the Philippines' PSEi Index hit a new intraday record high, with a 1.3% gain in the morning session.
"Equity markets were mostly muffled as the risk rally appears to lose momentum," said Chang Wei Liang, an analyst at Mizuho Bank in Singapore.
In China, value-added industrial output--a rough proxy of economic growth--rose 6% from a year earlier in August, slowing from July's 6.4% increase. Meanwhile, a key gauge of construction activity was up 7.8% for the year through August, slower than an 8.3% increase through July.
"It was a surprise to us that the growth rate in fixed-asset investments came down so speedily, mostly due to the weakness in construction sector, " said ING's Greater China economist Iris Pang. The latter is a direct reflection of a dip in real estate activity, likely due to Beijing's efforts to cool the overheating property market, Ms. Pang said.
Chinese banks were laggards in the Hong Kong market, with Industrial and Commercial Bank of China losing 1% and China Construction Bank down 0.7%, extending declines after the data release.
The weak data from China also came as Chinese metals prices took a beating from overnight declines in global metals prices, amid further gains in the U.S. dollar.
Chinese iron-ore futures traded in Dalian slid 5.2% to their lowest level in two weeks, while steel-rebar prices slipped in Shanghai.
Strength in crude oil prices overnight lifted energy-sector stocks across the region. Oil prices jumped to one-month highs in the U.S. after the International Energy Agency said global crude production fell in August for the first time since April.
Among key energy shares, Japan's Inpex and Japan Petroleum added around 1% each as crude prices mostly held on to gains in Asia trade. In Australia, oil producer Santos was up 1%, while Woodside Petroleum and Oil Search logged 0.8% gains each.
Enthusiasm in the Sydney market was muted despite an upbeat jobs report in Australia. The economy there added 54,000 new jobs in August, marking 11-straight months of employment gains. That helped the Aussie dollar come off session lows to buy US$0.8003 after overnight weakness in New York.
The British pound sterling, meanwhile, remained under pressure to trade down 0.1% against the greenback, ahead of the Bank of England's decision on interest rates due later Thursday.
James Glynn and Ese Erheriene contributed to this article.
Write to Kenan Machado at [email protected]