AFP – Asian markets sank Wednesday and the dollar struggled to bounce back following a worse-than-expected reading on US factory activity that revived worries about the impact of the trade war on the global economy.
Adding to the selling pressure in Hong Kong were long-running concerns about the impact of increasingly violent pro-democracy protests in the city that saw a demonstrator shot and wounded by police on Tuesday.
Regional investors took their lead from Wall Street, where equities tanked in response to news that an index of US manufacturing activity fell last month to its lowest point since June 2009.
The data pointed to the impact of the China-US trade war on the world’s top economy and will likely put pressure on Donald Trump to push through an agreement. Top level talks are planned for this month.
Manufacturing is “thought to be the specific chunk of the economy the president must… protect and the sector the US aggressive trade policies were supposed to enhance”, said Stephen Innes, Asia-Pacific market analyst at AxiTrader.
“So, the data could also imply not only monetary policy infusion is on the way but could increase the odds of some type of trade war detente.”
The figures combined with a weak eurozone inflation reading and a contraction in Britain’s economy in the second quarter.
Tokyo ended the morning session 0.7 percent lower, Sydney fell 1.3 percent and Singapore lost 0.8 percent, with Taipei, Wellington and Manila also lower.
– Johnson’s new offer –
Seoul shed more than one percent after North Korea fired two missiles into the sea just a day after Pyongyang said it would resume stalled nuclear talks this week.
Hong Kong dropped one percent as investors returned from a public holiday to mark China’s National Day but which saw some of the worst violence in the city since protests began in June.
A teenager was shot in the chest by a policeman, fuelling fears of a worsening of the unrest that has crippled the city’s economy.
On currency markets the dollar was unable to make headway after dropping Tuesday following the US factory data, which led to speculation the Federal Reserve will cut interest rates again this month.
However, it was holding its own against the pound as Prime Minister Boris Johnson prepares to submit his final offer for a new Brexit deal later in the day, warning that if the EU turns it down Britain would leave the bloc this month with no divorce deal.
Dealers are also awaiting the release Friday of US jobs data, which could give an idea about the Fed’s rate plans, while the corporate earning season is also about to get underway.
“For the month of October I think we are going to continue to see there is no shortage of headwinds for what is going on in the environment in terms of risk to economic growth and global growth,” Terri Spath, chief investment officer at Sierra Investment Management, told Bloomberg TV. “There will be a lot more attention paid to that.”
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: DOWN 0.7 percent at 21,742.70 (break)
Hong Kong – Hang Seng: DOWN 1.0 percent at 25,842.77
Shanghai – Composite: Closed for a public holiday
Euro/dollar: UP at $1.0939 from $1.0935 at 2045 GMT
Pound/dollar: DOWN at $1.2292 from $1.2300
Dollar/yen: UP at 107.73 yen from 107.69 yen
West Texas Intermediate: UP 61 cents at $54.23 per barrel
Brent North Sea crude: UP 52 cents at $59.41 per barrel
New York – Dow: DOWN 1.3 percent at 26,573.04 (close)
London – FTSE 100: DOWN 0.7 percent at 7,360.32 (close)