TOKYO- Global shares fell to one-month lows after US manufacturing activity tumbled to more than a decade low, sparking worries that the fallout from the US-China trade war is spreading to the US economy.
A slowdown in US economic growth would remove one of the few remaining bright spots in the global economy and come just as Europe is seen as close to falling into recession.
MSCI’s gauge of stocks across the globe, covering 49 markets, dipped 0.06 percent to a low last seen in early September, after shedding 0.83 percent in the previous session.
In Asia, MSCI’s ex-Japan Asia-Pacific shares index dropped 0.7 percent, with Australian shares falling 1.3 percent and South Korean shares shedding 1.4 percent. Japan’s Nikkei slid 0.65 percent. China markets are closed for a one-week holiday.
Hong Kong’s Hang Seng index fell 0.8 percent in early trade after a market holiday. On Tuesday, Hong Kong police shot a teenage protester, the first to be hit by live ammunition in almost four months of unrest in the Chinese-ruled city.
Data on Hong Kong September retail sales is due later on Wednesday.
“Nothing other than a terrible number is conceivable here,” ING chief Asia-Pacific economist Rob Carnell said in a note, adding that he was watching Hong Kong events “with a growing sense of despair.”
Adding to tensions in Asia, North Korea carried out at least one more projectile launch on Wednesday, a day after it announced it will hold working-level talks with the United States at the weekend.
On Wall Street, the S&P 500 lost 1.23 percent to hit four-week lows.
Selling was triggered after the Institute for Supply Management’s (ISM) index of factory activity, one of the most closely-watched data on US manufacturing, dropped 1.3 points to 47.8, the lowest level since June 2009.
A reading below 50 indicates contraction in the manufacturing sector. Markets had been expecting the index to rise back above 50.
The data came after euro zone manufacturing data showed the sharpest contraction in almost seven years.
“In terms of the outlook on manufacturing, US-China trade talks planned next week is everything. If that goes well, we could well see a V-shaped recovery in the ISM data in coming months,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
“That means we can’t just bet on a further decline in the US economy now. On the whole I don’t think we need to change our view that the US economy remains relatively solid,” he added.
The poor data lifted the Fed funds rate futures price sharply, with the November contract now pricing in about an 80 percent chance the US Federal Reserve will cut interest rates this month, compared to just over 50 percent before the data. – Reuters