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Wall Street stocks followed China lower on Tuesday, after fresh data from Beijing pointed to a continued slowdown in the world’s second-largest economy, stoking concerns over global demand.
Wall Street’s benchmark S&P 500 fell 0.1 per cent and the tech-focused Nasdaq Composite gave up 0.3 per cent, as US markets reopened after Labor Day holiday.
In China the benchmark CSI 300 dropped 0.7 per cent and Hong Kong’s Hang Seng was down 2.1 per cent, erasing most of the gains both indices made a day earlier after news of fresh government support for the property sector.
Investors were once again concerned over the health of the world’s second-largest economy, after private survey data showed that service sector activity in August declined to its slowest rate since Chinese president Xi Jinping’s stringent coronavirus controls were lifted at the start of the year.
The Caixin Services Purchasing Managers’ index came in at an eight-month low of 51.8 last month, down from 54.1 in July and below the 53.6 forecast of economists polled by Reuters. The reading approached the neutral 50 mark which separates expansion from contraction.
Shares in China’s troubled developer Country Garden fell 1 per cent, paring larger losses from earlier in the day, after the company narrowly avoided a default by making late payments on two dollar bonds within their grace periods.
The developer, which some investors see as a gauge of the health of China’s once-dominant property sector, initially missed those payments in early August and was granted a grace period that had been set to expire this week.
The Hang Seng Mainland Properties index declined 2.8 per cent on Tuesday, a day after Beijing vowed to extend greater support to the property sector, which has struggled from weak demand since the country reopened after three years of strict pandemic lockdowns.
Over the weekend, the government encouraged lenders to cut interest rates on existing mortgages and introduced policies that would allow a dozen of China’s largest cities to reduce initial payments for homebuyers.
In the eurozone, economic data also failed to match expectations, with the HCOB final Composite Purchasing Managers’ index falling to 46.7 in August, down from 48.6 in July, its lowest level since November 2020. The reading came in below the initial estimate of 47.
Yet morning declines in European stocks were balanced out by gains in the energy sector after Saudi Arabia announced it would extend its oil supply cut of 1mn barrels a day until the end of December.
The international benchmark Brent crude rose as much as 1.1 per cent to $90 a barrel after the announcement, while the US marker, West Texas Intermediate, added 1.7 per cent to $86.91.
The pan-European Stoxx Europe 600 steadied from early morning losses to trade flat by the afternoon, while France’s Cac 40 and Germany’s Dax both lost 0.1 per cent. The Stoxx Europe 600 Energy index rose 1.3 per cent.
Australia’s S&P/ASX 200 declined 0.1 per cent after the country’s central bank kept interest rates steady as expected, but noted that further tightening could be required. The Australian dollar dropped 1.3 per cent against the US dollar.
Investors’ attention turned to US factory orders data, which is expected to have declined 2.5 per cent in July, after rising 2.3 per cent in the previous month, in a sign that high interest rates weighed on manufacturing activity.
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