Asian shares continued to decline amid concerns over China’s growth and the commodity selloff. China’s factories have cut back activity to a larger extent than previously expected during the month of July. The rate of contraction has been the steepest in over two years as new orders diminished according to a new private survey that stirred the markets. Analysts point towards early July’s stock market panic as the cause. They posit that disappointing manufacturing PMIs have in fact reflected the mass selloff of Asian shares as the cause for retreating manufacturing. MSCI’s broadest index of Asia-Pacific shares outside Japan declined more than 1% as financials lead the pack in terms of declines. The decline brought the index near this year’s lows, causing concerns that a new negative record will be reached. Japan’s Nikkei fell 0.5% but has since pared its losses to a 0.2% daily decline.
In the meantime, European traders are looking forward to the reopening of the Greek stock market today after nearly five weeks, though major declines are expected upon reopening. Trading in Athens’ bourse was suspended in June as part of the capital controls meant to prevent the outflow of funds from the banks and country. The Greek government has since reached an agreement with its creditors allowing it repay its debts in exchange for a set of economical reforms that would maintain a balanced budget. Analysts are expecting shares to fall sharply as the market opens, possibly affecting other markets as well. On Friday, European stock markets reached marked gains. The FTSE added 27.41 points, or 0.41%, to close the week at 6696.28. The German DAX gained 51.84 points, or 0.46%, to trade at 1308.99 and the French CAC added 36.19 points, or 0.72%, to trade at 5082.61.
The euro strengthened on Friday against the dollar as new data indicated that July’s consumer prices were 0.2% higher than the previous year. The figure supported the European Central Bank’s expansion policy, which has been under some scrutiny since commencing a fully-fledged quantitative easing program earlier this year. The euro further strengthened after new data revealed that U.S. inflation was lower than previously suggested. The reveal has caused many analysts to give up on a September U.S. interest rate hike and instead pointed towards December as a likely alternative.
The upcoming week includes a number of relevant economic data releases. U.S. and Eurozone manufacturing data will be released today. However, the U.S. nonfarm payrolls, scheduled for release this Friday, will be the focus this week. The Federal Reserve stressed its data-dependent position on raising interest rates on numerous occasions, making this week’s report particularly influential.