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Asia markets fall after S&P 500 closes at new low for the year; China factory activity expands

A pedestrian looks at Japanese companies’ share prices of the Tokyo Stock Exchange displayed on an electronic board in Tokyo on April 30, 2021.

Shares in the Asia-Pacific were lower on Friday, the last day of the third quarter, following another sell-off on Wall Street overnight. China’s official factory activity data unexpectedly expanded in August, beating estimates.

In Japan, the Nikkei 225 slipped 1.78%, and the Topix index fell 1.54%. Australia’s S&P/ASX 200 lost 0.88%.

The Hang Seng index in Hong Kong fell 0.44%, with the Hang Seng Tech index dropping 2.08%. Mainland China’s Shanghai Composite shed 0.38%, while the Shenzhen Component was 0.784% lower.

The Kospi in South Korea declined 0.45% and the Kosdaq shed 0.61%. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.48%.

U.S. stocks tumbled in Thursday’s session, with the S&P 500 hitting a fresh low for the year and also reaching a new closing low. The index dropped 2.1% to end the session at 3,640.47. Meanwhile, the Dow Jones Industrial Average slumped 458.13 points, or 1.54%, to 29,225.61. The tech-heavy Nasdaq Composite lost 2.84% to 10,737.51.

“Geopolitical and inflation risks are not subsiding, and risk assets are taking the strain as expectations of lower growth and higher funding costs continue to permeate,” analysts at ANZ Research wrote in a Friday note.

.N225Nikkei 225 Index*NIKKEI25979.75-442.3-1.67
.HSIHang Seng Index*HSI17084.31-81.56-0.48
.AXJOS&P/ASX 200*ASX 2006498.7-56.3-0.86
.KS11KOSPI Index*KOSPI2160.05-10.88-0.5
.FTFCNBCACNBC 100 ASIA IDX*CNBC 1006909.37-75.47-1.08

— Sarah Min and Samantha Subin contributed to this report.

China reports better-than-expected factory activity for September

China’s official manufacturing Purchasing Managers’ Index surprisingly grew in September to 50.1, much higher than the 49.6 predicted by analysts in a Reuters poll.

The 50-point mark separates growth from contraction. PMI prints compare activity from month to month.

Meanwhile, the Caixin/S&P Global manufacturing Purchasing Managers’ Index, a private survey of factory activity reported a contraction with a reading of 48.1.

“Subdued demand conditions and lower production requirements led firms to cut back on their purchasing activity in September, with the rate of decline the quickest in four months,” the Caixin press release said.

The official non-manufacturing PMI came in at 50.6 in September, down from 52.6 in August.

— Abigail Ng

Factory activity in China expected to contract again

China’s official manufacturing Purchasing Managers’ Index for September is expected to come in below the 50-point mark separating growth from contraction, according to a Reuters poll of analysts.

Economists expect a figure of 49.6, slightly higher than August’s 49.4, which would mark the third consecutive month of contraction.

PMI readings are sequential and represent month-on-month expansion or contraction.

A private survey of Chinese factory activity is also due on Friday, and analysts polled by Reuters predict that the print will come in at 49.5.

— Abigail Ng

Japan’s industrial production rises more than expected

Industrial production in Japan grew 2.7% in August from July, according to official data, marking the third consecutive month of growth. That figure soundly beats expectations of a 0.2% increase in a Reuters poll.

Retail sales also jumped 4.1% in August compared with a year ago, beating a Reuters forecast of a 2.8% rise.

— Abigail Ng

CNBC Pro: Is the Fed on the right track? Wall Street veteran Ed Yardeni says this is what it should do next

The U.S Federal Reserve announced yet another 75 basis point hike earlier this month, sending the federal funds rate up to a range of 3% to 3.25%. The central bank also signaled it may raise interest rates up to as high as 4.6% in 2023 to control inflation.

Ed Yardeni, the economist who coined the term “bond vigilantes,” gives his take as the Fed’s response to inflation comes under intense scrutiny.

Pro subscribers can read more here.

— Zavier Ong

Fed’s Loretta Mester says interest rates are not yet restrictive

Cleveland Fed Pres. Loretta Mester: Interest rates are not yet restrictive

Cleveland Federal Reserve President Loretta Mester said interest rates are not yet restrictive, and there’s more to be done to bring down inflation.

“Inflation is still at a 40 year high,” Mester told CNBC’s Steve Liesman during an appearance on “Squawk Box.” “So right now the conversation has to be we have to do, what we must do to get back to price stability, because we can’t have a healthy economy, we can’t have good labor markets over time, unless we get back to price stability.”

Mester said she’s probably “a little bit above the median path” among Fed officials when it comes raising interest rates, citing the persistence in inflation.

“We’re still not even in restrictive territory on the funds rate, so you’re right, we’ve moved the funds rate up 300 basis points this year, but look how high inflation is,” Mester said.

— Sarah Min


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