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Asia markets weighed by weak China data, oil price drop

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[TOKYO] Asian stock markets struggled to post big gains on Tuesday as oil prices fell again and weak Chinese manufacturing data deflated investors' spirits, although stimulus moves by the Chinese central bank tempered the bad news.

The mixed picture for stocks across the region followed a choppy session on Wall Street where the major indices finished Monday in the red, as profit-taking set in following a string of gains in the last two weeks.

Worries about China boosted the Japanese yen - seen as a safe haven in times of turmoil - which weighed on the Tokyo stock market as the stronger currency threatened exporters' profitability.

Tokyo's benchmark Nikkei 225 index was down 0.69 per cent by the lunch break, while Shanghai edged up 0.20 per cent and Hong Kong added 0.55 per cent. Sydney was up 0.54 per cent.

On Monday, China's central bank cut the proportion of funds banks must set aside as reserves, in Beijing's latest attempt to tackle slowing growth in the world's second largest economy.

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Policymakers trimmed the so-called "reserve requirement ratio" (RRR) for financial institutions by 0.50 percentage points, freeing up more funds for them to lend.

The move came after a G20 finance ministers' meeting in Shanghai, which stressed the use of all available policy tools to boost global growth, and with Chinese and world stock markets hammered by worries over the economy.

"The RRR (reserve requirement ratio) announcement offered something for everyone," Sean Callow, a foreign-exchange strategist in Sydney at Westpac Banking Corp, told Bloomberg News.

"You could welcome the easing as supportive of growth and indicative of less pressure from capital outflows, or you could see it as a reflection of even greater weakness than expected," Callow added.

A gloomier mood set in, however, as official data Tuesday morning showed that manufacturing activity in China shrank at its fastest rate in four years in February, reigniting worries about the powerhouse economy.

The official Purchasing Managers' Index (PMI), which tracks activity in factories and workshops, fell to 49.0 last month, figures from the National Bureau of Statistics (NBS) showed.

That marked the seventh consecutive monthly contraction in the official index, which Bloomberg News said was the longest on record.

The focus on China would now shift to the National People's Congress, the annual meeting of its rubber-stamp parliament, beginning on Saturday, traders said.

Also hitting sentiment, oil prices fell again after a rally in US trading stoked by major crude consumer China's moves to tackle its slowing economy and Saudi Arabia welcoming cooperative action to stabilise the market.

Top oil producer Saudi Arabia suggested openness in reaching a coordinated solution to market volatility, as a global supply glut weighs on prices.

US benchmark crude for April fell seven cents to US$33.68 a barrel on Tuesday while Brent slid 19 cents to US$36.38 a barrel.

In currency markets, the dollar slipped to 112.41 yen from 112.72 yen in New York late Monday.


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