Asian shares declined for the third consecutive day after weak manufacturing data released in China fueled worries worldwide over diminishing global growth. Signs that China was slowing down could have been easily spotted for quite some time, as seen in falling commodity prices and soft trade growth. Unfortunately, this week’s PMI data has shown that the China’s manufacturing sector shrank at it fastest pace in three years. More U.S. data has revealed that factory activity has hit a two year low in the month of August. Chinese benchmarks extended their declines after the release of the worrisome data in early Wednesday trading. Despite falling nearly 4% earlier, the CSI300 and Shanghai Composite Index pared their losses to post a 1.1% and 0.8% decline, respectively.
U.S. stocks started the month of August with significant declines after suffering one of Wall Street’s worst months since 2012. Major benchmarks followed the weak data releases that fueled the already-growing concerns over global economic slowdown. The Dow Jones Industrial Average fell 469.7 points, or 2.8%, to close the day at 16058.3. The S&P 500 led the declines based a percentage with a 58.3 point decline (3.8%) to trade at 1913.8. The Nasdaq Composite fell 140.4 points, or 2.9%, to close the day at 4636.1. The S&P fell 6.26% during the month of August, marking its worst monthly performance since mid 2012. The recent rout erased nearly $5 trillion in global equity as traders moved away from stocks towards less volatile investments.
Commodities were hit as well. After the strongest rally in a quarter of a century, U.S. crude oil prices fell 8.3% to trade at $45.12 a barrel on Tuesday. It has since extended its losses with an additional 2.38% decline to $44.33 in early Wednesday trading. The driving force behind these declines is mostly attributed to worries over China’s energy demand, which tend to go hand-in-hand with the manufacturing sector’s health. However, recent U.S. data has shown that stockpiles have grown again, further fueling concerns. The market’s condition has also been reflected in metals. Copper, a crucial ingredient in manufacturing, has fallen 1% to $2.31 a pound. Gold, however, has inched higher and is currently trading at $1,141.1 as many traders move to gold as a safe-haven investment.
Today, ADP will release its U.S. employment change survey ahead of Friday’s official nonfarm payrolls data from the government. The European Central Bank will release its interest rate decision on Thursday and will likely maintain its expansion policy for the time being. However, in light of the possible U.S. interest rate hike in September, the main focus this week will be the release of nonfarm payrolls on Friday.