Asian stocks dropped on Thursday as China’s benchmark stock index hit a 4-year low on renewed concerns over an increasing economic impact caused by a deepening Sino-US trade conflict.
MSCI broadest index of Asia-Pacific shares outside Japan fell 0.3 percent to $482.23.
Japan’s Nikkei 225 was down 0.8 percent to ¥22,658.16 after data released earlier in the day showed exports from the world’s third-largest economy slipped for the first time since late 2016 due to a decline in shipments to the US and China.
However, weakness in exports could only be temporary, according to economist Kazuo Momma saying natural disasters had triggered a huge disruption on supply chain and some industry production and also transport in September.
Momma added that he expect some fairly reasonable bounce back this month and possibly the following month.
Over in South Korea, the KOSPI shed 0.8 percent to ₩2,148.31, while Hong Kong’s Hang Seng index shrunk 0.03 percent to HK$25,454.55.
While the Asian market showed a gloomy mood, the European stock market started the day on a positive note. UK’s FTSE 100 lost 0.03 percent to £7,052.25, Germany’s DAX gained 0.2 percent to €11,747.45, and France’s CAC 40 climbed 0.3 percent to €5,164.15.
Shanghai Composite Index Falls to 4-year Low
Equities in mainland China experienced huge losses, with the nation’s premier warning that the economy faces growing downward pressure, amid fears over the impact of an escalating tariff war with the US.
The Shanghai Composite Index, China’s benchmark, skidded 2.9 percent to CN¥2,486.42, its lowest level in four years, while the blue-chip CSI 300 index dropped 2.3 to CN¥3,044.39, not far from its more than 2-year low booked on Wednesday.
The Shanghai composite has lost a total of 7.6 percent last week.
China’s lending data published a day earlier offered slight comfort for investors ahead of Friday’s release of third quarter gross domestic product (GDP) report that is expected to show the slowest growth since the global financial crisis.
Chinese banks extended CN¥1.38 trillion ($199.25 billion) in net new yuan loans in September, significantly surpassing analysts’ forecast and ending higher than the previous month.
Analysts stated that the overall falling trend of total social financing growth remains unchanged, and the loosening of the credit situation that the market has been waiting for has not yet emerged.
In recent months, China has lifted economic stimulus to offset any negative impact from a trade a dispute with the US. The People's Bank of China (PBOC) is increasingly expected to reduce bank reserve requirements in 2019.
Hawkish Fed Minutes
Adding more pressure on Asian stocks was the hawkish minutes of the Federal Reserve’s September 25-26 meeting.
The latest report of the central bank showed every Fed policymaker supported rate hikes last month and also generally agreed borrowing costs were set to increase further.
That strengthens expectations that US yields will climb further despite US President Donald Trump’s view that the central bank was tightening too much.
Chief investment officer at a UK wealth management firm Peter Lowman stated that corporate have done incredibly well but it is clear they are going into monetary tightening in the US and that makes people worried about global debt having gone up so much in recent years.
At a time of simmering trade war tensions, people are perhaps taking chips off table and maybe going into cash and short-dated bonds, Lowman said.
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