Markets across Asia slumped on Monday as political uncertainty in Europe hurt risk appetite and weak economic data out of China worsened investor mood.
China’s new home prices fell at the fastest pace in more than 9-1/2 years in May, official data showed on Monday, with the property sector struggling to find a bottom despite government efforts to rein in oversupply and support debt-laden developers.
Industrial output in the world’s second-largest economy also lagged expectations, adding pressure on Beijing to shore up growth.
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Meanwhile, the People’s Bank of China (PBOC) kept its one-year rate unchanged, dashing some speculation of a cut after data on Friday showed the country’s new bank lending rebounded far less than expected in May and some key money gauges hit record lows.
China’s official Financial News reported on Monday that there was still room to lower rates, but there were internal and external constraints on policy.
Those factors pulled down stocks across the mainland and Hong Kong.
China’s key benchmark Shanghai Composite index ended 0.55% down at 3,015.89 points — its lowest close since April 16. The blue-chip CSI300 index also struggled, falling 0.15% to close at 3,536.20 points.
The real-estate sector led the session’s losses, with a sub-index tracking the industry slumping 2.68%.
Sentiment was hit in Hong Kong as well, where the benchmark Hang Seng index gave up early gains to slip below the 18,000-mark and close 0.03% lower.
The sub-index of the Hang Seng tracking the property sector slipped 0.7%. Energy shares added to Hang Sing’s woes, dipped 1.6%.
Nikkei breaks below 38,000
China’s woes added to already sour investor mood as anxiety rises about France’s upcoming snap election.
French markets endured a brutal sell-off last week ahead of a snap election that might give a majority to the far right, with risks to the country’s fiscal position and the stability of the euro zone.
The euro, meanwhile, hit a four-month trough at 0.9505 francs on Friday.
“A French challenge to the region’s fiscal arrangements would be problematic and have far-reaching implications,” analysts at JPMorgan warned. “At this stage, the situation in the run-up to the first round of voting is still very fluid.”
The resulting broader risk-off mood prevailed on Japan’s Nikkei share average, which dropped below the psychologically key 38,000 level for the first time this month.
The Nikkei ended the day down more than 700 points or 1.8% at 38,102.44. Earlier in the day, the index fell as much as 2.2% to 37,956.49 for the first time since May 30.
The broader Topix skidded 1.7%.
The Nikkei has mostly fluctuated some 500 points either side of 38,500 since late April, after hitting a record peak at 41,087.75 on March 22 and then dropping back as far as 36,733.06 a month later.
“Basically, the Nikkei has been tracking pretty much sideways for a long time, and now it’s being shaken a little by some worries about the economy,” in Japan, the United States and Europe, said Kazuo Kamitani, an equities strategist at Nomura Securities.
Safety test scandal
Among the biggest drags on Nikkei was Toyota Motor, which slid 2.6% amid continued fallout from a safety test certification scandal. National broadcaster NHK reported that Toyota would extend a production halt for affected models by at least an extra month to the end of July.
Toyota chairman and family scion Akio Toyoda faces a vote against his re-election at an annual shareholder meeting on Tuesday.
Car-related shares among the worst performing sectors during Monday’s session, with automakers and suppliers shedding 2.6%.
Suzuki Motor and Mazda, both of which are also named in the scandal, lost 3.6% and 3.7% respectively.
Chip-related shares also retreated, with Tokyo Electron off 2.5% and Advantest tumbling 3.7%.
Elsewhere across the region, Taipei, Seoul, Bangkok and Manila slumped, while Mumbai emerged as an outlier, ending 0.29% higher at a new all-time high. Markets in Singapore and Jakarta were on holiday.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.14%.
Key figures:
Tokyo – Nikkei 225 < DOWN 1.83% at 38,102.44 (close)
Hong Kong – Hang Seng Index < DOWN 0.03% at 17,936.12 (close)
Shanghai – Composite < DOWN 0.55% at 3,015.89 (close)
London – FTSE 100 < DOWN 0.08% at 8,140.78 (1300 GMT)
New York – Dow < DOWN 0.15% at 38,589.16 (Friday close)
- Reuters, with additional editing by Vishakha Saxena
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