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Asia stocks hobbled by growth woes, China PMI fails to impress

By Hideyuki Sano

Reuters

10:22 PM EDT, October 22, 2014

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TOKYO (Reuters) - Asian shares sagged on Thursday after a retreat on Wall Street and falling crude oil prices rekindled investor anxiety over slowing global growth, while a mixed picture on Chinese manufacturing failed to impress markets.

Japan's Nikkei share average fell 0.5 percent while MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.2 percent.

The flash HSBC/Markit manufacturing purchasing managers' index (PMI) edged up to a three-month high of 50.4 from a final reading of 50.2 in September, and just a hair's breadth from the 50.3 reading forecast by analysts.

But the level of output in factories fell to a five-month low of 50.7, just above the 50-point level that separates growth from contraction on a monthly basis, underscoring a cooling economy.

"While the manufacturing sector likely stabilised in October, the economy continues to show signs of insufficient effective demand," said Hongbin Qu, chief economist for China at HSBC.

Prior to the Chinese PMI, Wall Street shares slid on Wednesday after big gains in the past few days.

Energy companies were hit by a fall in oil prices while earning results from companies such as Boeing and Biogen Idec failed to meet investors' lofty expectations.

In addition, a shooting incident at the Canadian parliament in Ottawa unnerved investors.

Oil prices flirted near multi-year lows hit last week, as data showed a second consecutive weekly jump in U.S. crude stockpiles.

The U.S. Energy Information Administration said crude stocks rose by 7.11 million barrels, more than double the 2.7 million barrel increase analysts had expected.

U.S. crude futures slipped in Asia, extending its 2.8 percent fall on Wednesday to trade at $80.46 per barrel, near two-year low of $79.78 hit last week.

"I think it will take some time before markets calm down. Market sentiment is still fragile. The market has realised that the U.S. economy cannot be decoupled from sluggishness in the rest of the world," said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management.

"But on the other hand, I think the market is now going to the other extreme in betting on recoupling of the U.S. and the rest of the world," he added.

The fall in oil prices underscored worries over the health of the global economy.

Turbulence has gripped global markets in recent weeks on anxiety about slowing world growth. In particular, investors have been rattled by the threat of deflation and recession in Europe and the Chinese economy cooling to its weakest in over five years in the third quarter.

A string of manufacturing reports from Europe due later in the day will give investors another chance to gauge the pulse of the world economy.

In the United States, a mild rebound in U.S. consumer prices in September reduced some bets the Fed might postpone possible plans to raise rates in 2015, keeping U.S. Treasuries in check.

The 10-year U.S. Treasuries yielded 2.208 percent, having risen as high as 2.250 percent on Wednesday.

The data also helped to lift the U.S. dollar against other currencies. The euro dipped to $1.2674, near its lowest level in more than a week, having slipped from $1.28875 marked on Wednesday last week.

The euro was not helped by anxiety that some European banks may fail stress tests by the European Central Bank, the outcome of which is due on Sunday. Spanish news agency EFE, citing unnamed financial sources, said 11 banks were set to fail.

The dollar also ticked up to 107.18 yen, up about a full yen from Tuesday's low of 106.15.

Elsewhere, the New Zealand dollar tumbled 1.0 percent to $0.78749 following data showing consumer price inflation in New Zealand slowed in the third quarter.


(Additional reporting by Koh Gui Qing in Beijing; Editing by Shri Navaratnam)