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Asian Stocks Down, Tough Week Ahead as Chinese PMI Data Disappoints

Stock MarketsAug 01, 2021 10:36PM ET
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By Gina Lee – Asia Pacific stocks were mostly down on Monday morning. Signs of a tough week ahead are emerging thanks to disappointing Chinese economic data and the country’s continuous regulatory crackdown.

China’s Shanghai Composite was down 0.42% by 10:24 PM ET (2:24 AM GMT) and the Shenzhen Component was down 0.29%. The Caixin manufacturing purchasing managers’ index (PMI) released earlier in the day, was a lower-than-expected 50.3 in July. The manufacturing and non-manufacturing PMIs for July, released on Saturday, were 50.4 and 53.3.

China’s regulatory crackdown on sectors including private education caused a selloff during the previous week. With no signs that the crackdown will ease, the U.S. Securities and Exchange Commission (SEC) halted Chinese firms’ U.S. listings pending better risk disclosures. Its Chinese counterpart, the China Securities Regulatory Commission, said it would increase communication with the SEC to resolve the issue.

Hong Kong’s Hang Seng Index inched down 0.04%. Japan’s Nikkei 225 jumped 1.59% while South Korea’s KOSPI inched down 0.08%.

In Australia, the ASX 200 rose 0.97%, and shares in buy-now, pay-later company Afterpay Touch Group Ltd. (ASX:APT) rose after it reached a buyout agreement with digital-payments platform Square Inc . (NYSE:SQ).

On the COVID-19 front, the city of Brisbane saw its lockdown, originally slated to end on Tuesday, extended to at least Sunday. Sydney is also under a lockdown that will be implemented for at least nine weeks until Aug. 28.

Meanwhile, the Reserve Bank of Australia handing down its policy decision on Tuesday and the Bank of England hand its decisions down on Thursday.

Global shares ended July with their longest winning streak since 2018, but the pace of gains was the slowest in the six-month winning stretch. The Chinese crackdown and worries over the economic recovery from COVID-19 sapped investor sentiment as the month ended.

Investors are now looking to the July U.S. jobs report, including non-farm payrolls, due later in the week. This data is expected to help them determine when the U.S. Federal Reserve will begin asset tapering, as the central bank has stated that further labor market progress is key to determining a timeframe.

Minneapolis Fed President Neel Kashkari added on Sunday that the spread of the COVID-19 Delta variant could have prevents some Americans from looking for work, potentially putting a dent in the U.S. economic recovery.

However, U.S. National Institute of Allergy and Infectious Diseases director Anthony Fauci warned that "things are going to get worse,” even as he added that the efficacy of COVID-19 vaccines could mean that a return to the lockdowns seen in 2020 is unlikely.

Investors remained cautiously optimistic.

“Shares remain at risk of a short-term correction or volatility as COVID-19 cases rise globally, the inflation scare continues and as we come into seasonally weaker months, but surging company profits in the U.S. and lower bond yields are providing support,” AMP (OTC:AMLTF) Capital head of investment strategy and chief economist Shane Oliver said in a note.

Asian Stocks Down, Tough Week Ahead as Chinese PMI Data Disappoints

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