Asian stock markets erased some of the gains made in yesterday’s rebound after the release of weak financial data in China and Japan, reigniting concerns over slowing global growth. Chinese consumer inflation for the month of August rose slightly, however, producer prices dropped for the 42nd consecutive month, indicating a risk of deflation in the second-largest economy in the world. Additionally, Japanese capital spending has fallen for the second consecutive month, leading some analysts to point out the country’s struggle to rebound from contraction in the second quarter. Based on the new data, analysts have revised their global forecasts, predicting a slower 3.5% growth. The Shanghai Composite Index was lower by 0.4%, as losses were limited by hopes that Beijing would introduce more stimulus measures. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.4% after an impressive 3.2%-gain on Wednesday. The South Korean Kospi stood out with a 0.6% rise, while Australian shares declined 2% as they were weighed down by a underperforming banking sector. The Japanese Nikkei fell 2.7% after surging 7.7% on the previous day.
U.S. stocks were lower amid another turbulent trading session. The Dow Jones Industrial Average fell 239 points, or 1.4%, to trade at 16,253.57 after gaining 172 points earlier in the session. The initial gains followed positive sentiments from Asia and Europe on the prospects of more stimulus measures being introduced to the market. The Standard and Poor’s 500 index fell 23.37 points, or 1.4%, to trade at 1,942.04 and the Nasdaq declined 44.5 points, or 1.2%, to trade at 4,756.53. The S&P’s energy sector suffered the biggest declines as oil prices resumed their declines. The big swings evident throughout the past week provide a strong indication that the combination between an upcoming interest rate hike by Federal Reserve and China’s rocky economic growth is keeping the market unsettled. So far, the latest rout has seen major U.S. benchmarks lose 10% since their latest peak. The upcoming U.S. interest rate hike would put a stop to years of low borrowing costs that helped fuel the financial markets both locally and globally. Prior to the latest selloff, most analysts predicted that the interest rate would rise this month. However, the latest round of troublesome economic signals have led many analysts to step back from their previous certainty regarding an interest rate hike.
Crude oil fell below $44 to reach its lowest level of the week at $43.36. Oil trading was volatile, as Tuesday’s rally was reversed after a report from the American Petroleum Institute showed a 2.1 million barrel increase in stockpiles. Another report from Energy Information Administration (EIA) has shown lower expectations for demand, leading to concerns over the high supply.
This week’s remaining economic events include the Bank of England’s interest rate decision later today. Eurozone inflation data will be released tomorrow.