Asian stocks slipped on Tuesday after a survey showed China’s services sector growth fell to a record low, pouring cold water on the positive market mood following upbeat US earnings and relief over Portugal’s rescue of its largest bank.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 per cent, turning negative after the China services purchasing managers' index(PMI) compiled by HSBC/Markit fell to 50.0 in July from a 15-month high of 53.1 in June. It was the lowest reading since November 2005 when the data collection began, indicating a recovery in the broader economy is still fragile and may need further government support.
“The weakness in the headline number likely reflects the impact of the ongoing property slowdown in many cities as property related activity, such as agencies and residential services, see less business,” said HSBC’s China chief economist Qu Hongbin.
Tokyo's Nikkei fell 0.2 per cent and mainland Chinese shares slipped 0.5 per cent from a seven-month high hit just before the data.
US stocks rallied on Monday, lifted by Portugal's decision to rescue Banco Espirito Santo and earnings from Warren Buffett's Berkshire Hathaway. Currency markets in Asia were focused on the Reserve Bank of Australia's (RBA) policy decision. The bank kept its key interest rate at a record low to spur hiring after unemployment climbed to match an 11-year high. The overnight cash rate target was held at 2.5 per cent for a 12th month Governor Glenn Stevens and his board announced in Sydney over-night.
The Australian dollar edged down to $0.9320, having bounced sharply on Monday from a two-month low of $0.9275 touched last week after a surprisingly large increase in Australian retail sales.
The US dollar was little changed at 102.575 yen, well below the four-month peak of 103.15 hit last week. The greenback was capped by a fall in Treasury yields overnight after weaker-than-expected US non-farm payrolls data on Friday knocked it off the 103 threshold. Treasury yields fell as the bond market retained its bullish tone after rallying Friday on the jobs report.
The euro was also effectively flat, at $1.3421 after being hoisted from eight-month lows below $1.34 in wake of Friday's US jobs data release. The euro has made little further headway since Friday's bounce, weighed by caution ahead of a European Central Bank meeting on Thursday.
In commodities, US crude extended gains from Monday when it rose as market attention shifted from swelling supplies to concerns about ongoing violence in Libya and other global hot spots. US crude gained 0.1 per cent to $98.41 a barrel.
Reuters
