Asian markets drop on Chinese, Japanese weak reports

Chinese and Japanese weak fundamental reports weighed on the performance of many Asian markets, while India’s stock markets at the same time were moving with a positive momentum.

Industrial profits from Chinese firms decreased by 4.6% in October compared to twelve months earlier, according to the Chinese National Statistics. The data were also discouraging compared to the previous month’s marginal drop of 0.1%. During the current year, it is the second lowest industrial profits result, after August’s 8.8% nosedive on a year-to-year basis while there were marginal gains only for the months March and April. The data are evidence that the Chinese industry is marching through a year of contraction, possibly a result of sluggish demand by the overseas markets. Markets reacted to the weak industrial data with the Chinese Shanghai Composite Index falling on Friday by a massive 5.8% to 3,436.30, while the Hong Kong Hang Seng Index also decreased by 1.9% to 22,068.32.

Japanese inflation data released on Thursday by the Statistics Bureau showed that the October Core Consumer Price Index (CPI) excluding fresh food decreased by 0.1% on a year-to-year basis. The weak CPI data followed Japan’s downwards inflationary trend as there were also declines for August and September. Given that inflation is the Japanese policymakers’ primary gauge for measuring economic progress, the weak CPI data might be seen as evidence that the Bank of Japan (BOJ) could consider additions in its monetary stimulus. On the other hand, data released about the Japanese unemployment rate for October showed a decrease to 3.1% compared to last month’s 3.4%. The strong Japanese labour market data surprised the markets as analysts were expecting the rate to remain stable at 3.4%. The Nikkei 225 Index fell by a marginal 0.3% and ended last week’s trading session at 19,883.94.

The additional evidence of China’s ongoing economic slowdown, together with the not-so-great Japanese data weighed on the performance of Asian markets. The Australian S&P/ASX 200 Index moved on Friday with losses by 0.2% to 5,202.6 and the South Korean Kossi also fell to 2,028.99. The continuous failure of the Chinese economy to show even the slightest signs of recovery adds fuel to speculations that the second largest economy’s slowdown is not a short-term trend while consumer demand from global markets is likely to stay subdued.

This week might be a very important one for the euro, and more specifically for the EUR/USD. Even though the current month’s overall decline of the currency pair has been connected with the pricing of a possible interest rate increase by the Federal Reserve (Fed), there is also the likelihood that the European Central Bank (ECB) to take action for boosting the Eurozone’s inflation level. The upcoming ECB interest rate decision, due on Thursday 03 December at 12:45 GMT, will be closely monitored by the markets as the Eurozone’s policymakers might decide on a surprise cut of the deposit rate. Where do you see the EUR/USD heading to?

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