Asian stocks sink on more China weakness; data-heavy week looms

Investing.com-- Most Asian stocks fell on Monday tracking weak signals from China, while anticipation of a string of key economic readings this week kept markets largely on edge.

Chinese stocks were the worst performers for the day, with the Shanghai Shenzhen CSI 300 and SSEC indexes down 1.1% and 0.7%, respectively, after data showed a sustained decline in the country’s industrial profits. Hong Kong’s Hang Seng index lost 0.7%, weighed chiefly by mainland stocks. 

The readings showed that China’s biggest economic engines remained under pressure, and also came as investor grew impatient over more stimulus measures from Beijing. 

Focus this week is now on key purchasing managers index readings from China for November, due Thursday. The readings are expected to offer more cues on business activity, after a surprisingly weak batch of PMIs in October. 

Concerns over China pulled broader Asian indexes lower, given the country’s role as a dominant trading destination for the region. Australian commodity stocks were particularly hit by this trade, which in turn saw the ASX 200 index sink 0.4%. 

Key readings on Australian inflation and retail sales are also on tap later this week, and are expected to factor into the Reserve Bank’s plans for interest rates. Governor Michele Bullock had recently warned that inflation may remain stickier than expected in the coming months.

Japan’s Nikkei 225 fell 0.5%, retreating after racing to 33-year highs last week. A batch of weak PMIs raised concerns over slowing business activity in the country, which is grappling with weak demand in its biggest export markets. Still, the prospect of a dovish-for-longer Bank of Japan has largely underpinned Japanese stocks this year, with the Nikkei on course for an over 8% rise in November.

South Korea’s KOSPI was flat before a Bank of Korea meeting on Thursday. 

Inflation, PMIs and GDP cues on tap 

Anticipation of a slew of key economic readings this week kept investors largely averse to risk-driven assets, pressuring Asian stocks. Along with China’s PMIs, markets are also awaiting inflation data from the euro zone, after the bloc slipped into a recession, as well as PCE price data- which is the preferred inflation gauge of the Federal Reserve. 

A second reading on U.S. third-quarter gross domestic product data is also due this week, as are readings on Japanese industrial production and retail sales.

While easing fears of higher U.S. interest rates had spurred strong gains in Asian markets through November, this optimism was now being dulled by concerns over slowing global economic growth.

A swathe of weak PMI readings from Japan, the euro zone and the U.S. had furthered this notion last week, as the effects of recent interest rate hikes and sticky inflation began to factor into the global economy.

This trend somewhat sullies the outlook for risk-heavy Asian markets, and could invite further weakness in the coming days, especially if investors lock-in recent profits.