Manufacturing slowdown and oil rally create uncertainty, leading to muted Asian stocks
Asian stocks remained mostly range-bound on Tuesday as weak manufacturing data raised concerns about slowing economic growth. A spike in oil prices also brewed fears of higher inflation. Hong Kong’s Hang Seng index was the worst performer for the day, falling 1.1%, as technology and property stocks were hit with a fresh wave of selling. The index was weighed down by concerns over slowing economic growth in China after a private survey revealed that the country’s manufacturing sector grew much less than expected in March.
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes moved less than 0.2% in either direction. A post-COVID rebound in the Chinese economy now appears to be running out of steam as local factories grapple with slowing overseas demand amid worsening economic conditions. However, some Chinese chipmaking stocks extended gains into a second straight session, as an investigation into U.S. memory chipmaker Micron Technology Inc (NASDAQ: MU) opened up the possibility of more market share for local manufacturers.
Japan’s Nikkei 225 index fell 0.3% after data on Monday also showed that the manufacturing sector shrank through March, while capital expenditure among the country’s largest companies slowed in the first quarter. South Korea’s KOSPI was among the few outperformers for the day, rising 0.4% after data showed that inflation grew slightly less than expected in March.
Fears of a global economic slowdown grew this week after data showed that manufacturing activity in the U.S., euro zone, and the UK remained in contraction through March. A spike in oil prices following an unexpected output cut by the Organization of the Petroleum Exporting Countries and allies also raised fears that higher fuel prices will keep inflation elevated in the near-term. Markets also feared that higher inflation could invite more monetary tightening by major central banks. This notion, coupled with a slowing economic rebound in China, weighed on the outlook for Asian markets.
Regional central bank meetings were also on the cards this week. Australia’s ASX 200 moved little ahead of a Reserve Bank decision on interest rates, with markets split over whether the bank will hike or hold interest rates. The Reserve Bank of India is also set to meet later this week and is expected to hike interest rates.