TOKYO (Reuters) – Asian stock markets began the week on a cautious note after soft economic data from China and Europe added evidence of cooling global growth and heightened anxiety about the growing impact of international trade frictions.
An investor sits in front of a board that shows stock information at a brokerage firm in Beijing, China on December 7, 2018. REUTERS / Thomas Peter
MSCI's broader index of Asia Pacific stocks outside Japan fell 0.1% early on Monday, led by losses in China and Hong Kong. The CSI 300 stock index of Shanghai and Shenzhen fell 0.9 percent
Other markets showed some resilience. Japan's Nikkei rose 0.5 percent, while US stock futures rose 0.2 percent. Taiwan also gained 0.3 percent.
On Wall Street on Friday, the S & P 500 lost 1.91 percent to 2,599.95, the lowest since April 2.
The benchmark fell 11.3% from the close of September 20 – the worst performance since it fell more than 14% between May 2015 and January 2016.
The biggest obstacle was Johnson & Johnson, which plummeted 10 percent of its biggest fall since 2002, after Reuters reported that the drugmaker knew its baby powder was contaminated with cancer-causing asbestos.
The market retreat also reflected a worsening global economic outlook, with the latest evidence of loosening coming from China and Europe.
The IHS Markit Flash Compound Purchasing Manager Index fell to 51.3, the weakest since November 2014, from a November final reading of 52.7. That was well below the pessimistic prediction of a Reuters poll, where the average expectation was a modest increase to 52.8.
The survey showed that euro zone firms closed the year in a bleak mood, expanding their operations at the slowest pace in four years, with new demand growth virtually depleted, plagued by trade tensions and violent protests in France.
Dismal economic news came after China released a series of indicators, with retail sales growing at the weakest pace since 2003 and industrial output rising at least in almost three years.
China's economy has been losing steam in recent quarters as a multi-year government campaign to curb lending has increased financial pressures on businesses, hampering production and investment.
Investors are now awaiting an important speech by President Xi Jinping on Tuesday to mark the 40th anniversary of China's reform and opening up.
In the currency market, the dollar held steady after reaching a 19-month high against a basket of six other big rivals on Friday, as the US economy appeared to be in better shape than others.
US retail sales, excluding cars, gasoline, construction materials and food services, rose by 0.9% last month, after a revised upward increase of 0.7% in October.
In this context, the US Federal Reserve is seen as almost certain to raise interest rates at its two-day policy meeting starting Tuesday, further increasing the dollar's lure.
At the same time, many market participants also expect the Fed to lower its projections for future interest rate hikes due to rising economic winds.
"You could argue that if the Fed's lower estimates, this could be taken as another sign of economic slowdown," said Hirokazu Kabeya, global chief strategist at Daiwa Securities.
"But given the fragile sentiment of the market, I would think it would be more dangerous if the Fed kept the view that it would raise rates three times next year."
The euro traded at $ 1.1307, slipping to $ 1.1270 on Friday, its lowest level since Nov. 28.
The pound hovered near its 20-month low last week as worries rose that Britain was headed for a chaotic exit from the European Union.
With just over 100 days until Britain leaves the bloc on March 29, the Brexit remains in the air with increasing requests for outflow without settlement, a potentially disorderly divorce that business fears would be highly detrimental, or for a second referendum.
The pound was trading at $ 1.2580, about one cent above Wednesday's low of $ 1.2477.
The yen was little moved at 113.48 per dollar.
The biggest driver was the Mexican peso, gained after the new leftist government of Mexico avoided big surprises in its first budget, respecting the promises made previously to the investors.
The peso rose 0.8 percent to 20.094 per dollar, close to a strong resistance of 20.
Oil prices have covered the wounds after Friday's slumps because of worries about the global economy.
West Texas Intermediate (WTI) crude futures were unchanged at $ 51.22 a barrel, after a 2.7% loss last week.
Editing by Shri Navaratnam