Stocks in Asia fell again on Friday after Chinese manufacturing survey showed activity contracting at the fastest pace since 2009. The Caixin/Markit Manufacturing flash PMI came in at 47.1 in August, below estimates that it would stay unchanged at 47.8. New orders, new export business and output prices all fell at a faster rate during the month, heightening fears over a deepening slowdown in China’s economy.
The Shanghai SE Composite index rebounded after briefly falling below the 3,500 level. It was down by 1.5% in late Asian session, while the Shanghai/Shenzen CSI 300 index was down by 2%. The Australian dollar, which often serves as a proxy for the Chinese economy, fell sharply against the dollar after the data, dropping from 0.7332 to 0.7286. It later rebounded back above the 0.73 level in late Asian trading to 0.7307.
Oil prices came under pressure on the prospect of ongoing weak demand from the world’s second largest economy. WTI and Brent crude futures were both down by 1.3% at $40.77 and $46.02 respectively in late Asian session.
The dollar was also under pressure as reduced expectations of a September rate hike weighed on US treasury yields. The dollar index fell to an 8-week low, while the euro rose on growing risk aversion. Strong US existing home sales data on Thursday did little to lift the dollar.
The greenback fell below the 123 handle against the yen, slipping to 122.99 yen in late Asian trading. The euro advanced to 1.1281 against the dollar and to 0.7181 against the pound. The pound took advantage of the dollar weakness to rise above 1.57 and was last trading at 1.5710.
The Swiss franc benefited from its safe-haven status to rise to 0.9571 francs per dollar and 1.0780 francs per euro. Gold also gained, hitting a 5-week high of $1168.16 before easing to $1156.60 in late Asian trading.
Looking to the rest of the day, Eurozone flash PMI for August will be the key data coming out of Europe. Canadian inflation and retail sales data should shed some light on the prospects of further rate cuts by the Bank of Canada, and flash manufacturing PMI for the US should also get some attention in US session.