China’s weak factory data sends market lower

The weak Shanghai stock market underlines persistent worries about China’s economic growth despite continued government measures.

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To make matters worse, on Friday, Markit reported that the Caixin Flash China General Manufacturing PMI fell to 47.1 in August, hitting a 77-month low. “Uncertainty is creeping into markets, as well as the economies on both sides of the Pacific, with China driving the fear”, said Evan Lucas, a market strategist at IG.

KEEPING SCORE: The Shanghai Composite Index was down 0.3 percent to 3,737.20 after plunging as much as 5 percent.

Shares in Taiwan and Hong Kong have been flirting with bear market territory, defined as a 20% drop from a recent peak. Hong Kong’s Hang Seng index was down 0.9 percent to 23,255.94.

Foreign investors pulled a net US$2.5 billion from Taiwanese shares this quarter, the most in Asia after Japan and South Korea.

Since June 12, the Dow Jones Industrial Average has posted a loss of 4.1%.

Each of those benchmarks is headed for a fifth straight week of declines.

“In the short term, the market will fluctuate on the weak side”, he said.

The British pound also gained, rising to a 7 1/2-year high on a trade-weighted basis as UK inflation data released on Tuesday beat expectations, bolstering bets that the Bank of England will raise interest rates in the coming months.

Global markets ended down after a fresh plunge in China’s markets rattled confidence. The onshore yuan is now 6.3965 against the US dollar. The currency can trade within a 2 per cent band above or below that. The currency closed at 6.3890 on Thursday.

West Texas crude saw a very small recovery overnight, to $US42.53 a barrel, remaining at six-year lows.

The jitters sent investors to assets perceived to be safe.

Shares fell in Asia on Thursday as investors reacted to another plunge in oil prices and the Federal Reserve’s signal that it was open to the possibility of an interest rate hike in September. It fell $1.85 to $41.27 on Wednesday. The CAC-40 in France was 0.4 percent lower at 4,963. The S&P/ NZX 50 Index slipped by 0.3% to 5710.76 as broadcaster Sky Network Television, telco Spark New Zealand and Fletcher Building declined. Yields fall when bond prices rise.

The China Investment Corporation, or CIC, is China’s sovereign wealth fund.

“The market is a bit nervous…but I don’t see a collapse here”.

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Indeed for all the ups and downs over the past few weeks in Shanghai, it’s Hong Kong that perhaps gives a better indication of what traders – Chinese and foreign alike – think about the prospects for the economy at the moment. Concern that demand is weakening has driven a commodities rout that has erased US$2 trillion from the value of mining and oil companies since the middle of past year.

Here’s the chart of today’s actionInvestingcom