Stock market, Chinese SME Caixin slips into contraction territory in August. Asia falls

Stock market, Chinese SME Caixin slips into contraction territory in August. Asia falls
Stock market, Chinese SME Caixin slips into contraction territory in August. Asia falls
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Sharp decline for most Asian equity markets on rising signs of weakness in China’s manufacturing sector, as concerns about the Federal Reserve’s next moves have increased ahead of this week’s key non-farm payroll data. The Nikkei index of the Japan Stock Exchange falls by 1.64% to 27,630 points, dragged down by car manufacturers such as Toyota Motor (-2%) despite the investment plan of up to 730 billion yen in Japan and the States United for the supply of batteries for electric vehicles.

Nikkei dragged down by auto manufacturers

Among other auto makers, Honda drops 1.6% and Nissan Motor drops 1.8%. Japan-China relations will be followed closely, after the Japanese government said on Aug. 31 that it plans to start manufacturing longer-range missiles and conduct research on hypersonic missile systems, in response to growing geopolitical tensions that include threats. Chinese against Taiwan.

Record trade deficit in August for South Korea

South Korea’s Kospi index fell 1.83% weighed down by losses in technology, energy and financial stocks and a record trade deficit in August. Hong Kong is also bad (-1.60%). The Fed’s hawkish stance on monetary policy triggered a rally in US Treasury yields to 3.195% over 10 years, putting pressure on the Hong Kong stock market, according to analysts at KGI Research. The recent weakness in tech stocks on the Nasdaq is also unfavorable for Hong Kong-listed tech stocks, analysts added.

Surprisingly, the Chinese SME Caixin slipped into contraction territory in August, at 49.5

Flat Shanghai (-0.05%) after Chinese manufacturing activity slipped into contraction territory in August due to Covid closures (Beijing authorities have ordered a total lockdown in the Chengdu megalopolis, 11 million people will be initially subjected to the test for Covid-19 in the next few hours) and the lack of energy caused by the drought that weighed on industrial activity. The Caixin Index of Manufacturing Purchasing Managers (SMEs) recorded a value of 49.5 in August compared to 50.4 in July. Economists had expected a reading of 50.2. A reading below 50 indicates a contraction.

A reading broadly in line with the August 31 government data, which showed manufacturing activity shrank for the second consecutive month in August. The official PMI was 49.94 in August. The Caixin survey differs from the official one in the type and number of companies interviewed. The survey is carried out on a smaller sample, consisting mainly of small private companies, while the government has a much larger sample and detects larger, mostly state-owned companies. Today’s data confirms that the mid-year recovery in China’s manufacturing sector has been short-lived and that the country faces a severe slowdown in industrial activity.

Although China lifted strict lockdowns for Covid in most cities, practices such as regular testing and localized quarantines remained in place, disrupting economic activity. A severe drought in Sichuan province has also caused electricity shortages in several industrial areas, further affecting production activity in the past two months. “Right now, the economy is still slowly recovering from a widespread Covid-19 epidemic in the first half of the year. However, local outbreaks and the violent heatwave have disrupted the trend and created new downward pressure. threatening recovery, “said Wang Zhe, senior economist at Caixin Insight Group.

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However, the expert noted that supply chains improved over the course of the month and that market sentiment also remained upbeat. China unveiled a series of stimulus packages to support growth after the economy narrowly avoided a contraction in the quarter to June. The weakness of the manufacturing sector seems to have also spilled over into services, which are a fundamental engine of growth.

Wall Street futures do not bode well

While the futures on Wall Street do not bode well (-0.25% on the Dow Jones and -0.54% on the S & P500) as well as those on the Eurostoxx50 (-0.80%), in the currency field, the Asian currencies weaken against the greenback and analysts expect the trend to continue: the yen has fallen to a 20-year low against the greenback. “The combination of a hawkish Fed, a likely recession in Europe and a dovish PBoC supports our near-term bullish view on the dollar / Asia,” Goldman Sachs analysts said in a statement, believing that within the region, the Korean won, the Taiwanese dollar, the Chinese yuan and the Malaysian ringgit may underperform, while they are more bullish on the Singapore dollar and the Thai baht.

Dollar always strong against other currencies, sales on gold and oil

The dollar / yen cross gained 0.35% at 139.40 and the dollar / won exchange rate rose 0.76% to 1.352. Instead, the euro is trading at 1.001 (-0.32%). According to Jonas Goltermann of Capital Economics, the euro will drop to 90 cents by mid-2023 and the pound to $ 1.05. This would be the minimum since 2002 for the euro and since 1985 for the pound. Finally, sales between commodities prevail: Wti -0.68% at 88.94 dollars a barrel and Brent -0.63% at 95 dollars a barrel. Gold was also in the red (-0.52% at $ 1,717 an ounce) following expectations that the Fed could keep the benchmark interest rates higher for a longer period of time. “The rise in global bond yields is kryptonite for gold and this trend could last for a while,” predicted Edward Moya, an analyst at Oanda. (All rights reserved)

The article is in Italian

Tags: Stock market Chinese SME Caixin slips contraction territory August Asia falls

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