(Reuters) – Jamie McGeever
Tighter financial conditions continue to dampen investor sentiment and hit global equities, with good old-fashioned PMI data showing the future of Asian markets News from China It will set the tone for Asian markets on Wednesday.
The potential for relief from the current downturn is in short supply.
China’s manufacturing sector, once the engine of world economic growth, has barely grown or contracted at all for a year. Economists expect August PMI to remain at 50.0 below the growth/expansion threshold.
Services PMIs have fared slightly better lately, but the broader economy is faltering, especially the real estate sector – earnings reports from China’s five largest banks on Tuesday showed that the first half of the year had Real estate-related bad debts rose sharply.
The yuan retreated from a two-year low against the dollar on Tuesday, but remains vulnerable. The dollar is strong – Fed rate hike expectations continue to grow, and the market is close to forecasting a federal funds rate of 4.00% next year.
Wall Street’s three major indexes closed lower on Tuesday, as world stocks fell again, global bond yields rose and the dollar rose. Put this all together and you see a rapid tightening of global financial conditions.
Some key economic indicators from Japan and South Korea are also likely to guide local markets on Wednesday. Industrial production in both countries is expected to fall in July from the previous month, as is Japan’s retail sales.
Key developments Wednesday that should give the market more direction:
China PMI (August)
Japan Industrial Output (July)
Japan Retail Sales (July)
Korea Industrial Output (July)
Korea Services Industrial Output (July)
Korea Retail Sales (July)
Australian Money Supply Loans (July)