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Asian stocks slide as China data disappoints, debt ceiling vote looms By Investing.com

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© Reuters.

Investing.com – Asian stocks sank on Wednesday, as Chinese markets led declines as manufacturing activity contracted for a second month in a row, while broader sentiment remained sour ahead of a vote to raise the US debt ceiling.

Chinese indices fell 1% and 0.6%, respectively, with the bluechip index hitting a six-month low. Official data showed that the country contracted in May, which led to a decline in overall business activity, and points to a slowdown in the economic recovery seen earlier in the year.

Chinese indices are also set to close down between 3.6% and 6% for the month of May, having largely retraced their gains for the year amid growing uncertainty over the recovery in Asia’s largest economy.

Losses in Chinese stocks spread to Hong Kong, sending the index down 2.5% to its weakest level in six months. The index is also set to lose nearly 9% in May.

Chinese markets were also affected by fears of deteriorating relations between Washington and Beijing, after China rejected a US request for a meeting between the two defense ministers.

Concerns about China have affected broader Asian markets, particularly those with significant business exposure to the country. The Australian index fell 1.2%, while the index lost 0.5%.

The ASX 200 index was also pressured by data showing a larger-than-expected rally in April, pointing to more interest rate hikes by the Reserve Bank in the coming months.

The Japanese index fell 1.2%, while the broader index fell 1% as investors booked recent profits. Both indexes have retreated from 33-year highs, but were set to gain between 3.9% and 8% in May, making them the best performers in Asia for the month.

A strong earnings season and optimism about a pessimistic Bank of Japan spurred sharp gains in the Nikkei through May. But the rally may now stall, given that Japanese indices are at levels last seen during the 1990s bubble.

The Japanese also unexpectedly contracted in April, while growing less than expected.

Broader Asian markets fell on Wednesday as investors remained on edge over the US debt ceiling. And while top Republican and Democratic lawmakers said they had reached an agreement to raise the cap, it now faces a vote in Congress later in the day.

This also comes just days before the deadline for a US default, which could have dire consequences for the global economy.

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