Asian shares fall after China releases disappointing data

Tokyo — Asian shares tumbled on Friday after China reported a set of weak data, fanning fresh worry of a sharp slowdown in the world’s second-biggest economy and leaving investors fretting over the wider impact of a yet unresolved China-US trade dispute.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.4%, while Japan’s Nikkei dropped 2.1%.

Mainland China’s benchmark Shanghai Composite and the blue-chip CSI 300 declined 0.6% and 0.9%, respectively, and Hong Kong’s Hang Seng tumbled 1.6%.

China’s November retail sales grew at the weakest pace since 2003 and industrial output rose the least in nearly three years as domestic demand softened further, underlining rising risks to the economy as Beijing works to defuse a trade dispute with the US.

The Chinese yuan lost 0.2% to 6.8910 to the dollar in the offshore trade following the data.

“Although hopes of progress in US-China talks and cheap valuations are supporting the market for now, we have lots of potential pitfalls,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

“If US shares fall below their triple bottoms hit recently, that would be a very weak technical sign.”

Overnight on Wall Street, the S&P 500 ticked down 0.02% to 2,650%, not far from its six-and-a-half-month closing low of 2,633% touched on November 23, while the Nasdaq Composite dropped 0.39%.

US corporate earnings due next month could throw a spotlight on the effect from the US tariffs on imports from China, while there is risk of a government shutdown and further political stalemate in a divided US congress, he said.

A Chinese commerce ministry spokesperson said on Thursday that China and the US are in close contact over trade and that any US trade delegation would be welcome to visit.

But that has hardly dispelled concerns about a broadening confrontation between the two economic heavyweights.

China said on Thursday a Canadian businessman is being investigated on suspicion of harming China’s security, days after a former Canadian diplomat was detained in an escalating diplomatic row.

The moves are seen as a reaction to Canada’s arrest on December 1 of Chinese executive Meng Wanzhou, the CFO of Huawei Technologies, for extradition to the US.

The euro changed hands at $1.1362, stuck in its well-worn $1.13-$1.14 range over the past few days.

The European Central Bank (ECB) ended its €2.6-trillion crisis-fighting bond purchase scheme but pledged to continue reinvesting maturing bonds — thereby avoiding shrinking its balance sheet — for an extended period of time.

The plan lifted Portuguese and Irish government bond prices sharply on Thursday.

“We expect the first rate hike in the fall of 2019. The ECB continues to pursue the objective of an expansionary monetary policy. With today’s decision to end QE [quantitative easing], the ECB is only taking very lightly the foot off the accelerator of monetary policy, which is by no means a real normalisation of monetary policy.” said Oliver Eichmann, co-head of EMEA fixed income at DWS in Frankfurt.

Sterling’s rally fizzled as signs that the British parliament was headed towards a deadlock over Brexit prompted traders to take profits from its gains made after Prime Minister Theresa May had survived a no-confidence vote.

May admitted on Thursday she did not expect a quick breakthrough in Brexit talks that would help get the deal through parliament.

The EU has said the agreed Brexit deal is not open for renegotiation even though its leaders on Thursday gave May assurances that they would seek to agree a new pact with Britain by 2021 so that the contentious Irish “backstop” is never triggered.

The currency traded at $1.2625, off Wednesday’s low of $1.2477, but remains on track to post its fourth consecutive week of losses, with a fall of 0.9% so far this week.

The dollar stood at ¥113.45, down 0.1% on the day but having risen from this week’s low of ¥112.245 set on Monday.