China shares were headed for their worst month in over two years
on Friday, after confidence in a government-led recovery wavered
earlier this week, knocking shares lower.
The Shanghai Composite Index opened 1.4% lower at 3655.67. The
smaller Shenzhen Composite fell 1.5% to 2096.02, while the
small-cap ChiNext opened 2.1% lower at 2507.26.
China's main stock index is on track to lose 9% this week, and
is down 13% month to date, which would make July its worst
performing month since June 2013.
In Hong Kong, the Hang Seng Index opened up 0.4%, and an index
of Chinese companies listed in the city rose 0.4%. Hong Kong shares
are on track to lose 6% this month, marking its worst monthly
performance since September, as volatility in China rattled global
investors.
Stocks elsewhere in the region were mixed, with the Nikkei Stock
Average flat, the S&P ASX 200 was up 0.4% and South Korea's
Kospi 0.3% higher. Overnight, U.S. economic output in the second
quarter came in slightly slower than expected at an annualized
2.3%, another piece of patchy data that casts uncertainty over the
timing of an expected rise in U.S. interest rates.
China shares have been reeling since an 8.5% loss on Monday, the
biggest daily decline in more than eight years, when investors
dashed for the exits on worries that government-backed funds might
wind down market support.
Shanghai is down 28% since its peak in mid-June, despite fresh
rhetoric from the securities regulator that it wouldn't pull away
from buying shares.
Analysts warned of further volatility in the afternoon trade
ahead of Chinese official manufacturing data Saturday. An early
gauge of manufacturing last week could throw doubt on the health
state-owned enterprises, according to analysts at IG. "This
question might see negative trading in the afternoon as investors
close out positions to mitigate that possible risk," wrote IG
analyst Evan Lucas in a note.
In Japan, shares were flat after disappointing consumer spending
data mitigated a better-than-expected inflation reading.
"If household spending continues to be weak, prices can't
continue to rise, and the BOJ might have to think about further
easing," said JPMorgan Securities Japan economist Masamichi
Adachi.
In commodities, a stronger U.S. dollar continues to batter
commodities, many of which are priced in the currency and have
become more expensive for foreign buyers. Expectations of a rate
increase in the U.S. also gives incentive to shift to higher
yielding assets, as commodities don't provide any income and cost
money to hold. Gold has sank to five-year lows, and is currently
trading at roughly flat at $1088.00 a troy ounce in Asian
trade.
Concerns about oversupply and weak demand in China, one of the
world's biggest commodities consumers, have weighed on oil prices
in recent months. The U.S. government will provide a report on oil
supply on Friday during the U.S. day. Brent crude, the global oil
benchmark, is up five cents to $53.36 in Asian trade.
The commodities-sensitive Australian dollar hit a six-year low
of $0.7293 Thursday and was last at $0.7294.
Eleanor Warnock contributed to this article.
Write to Chao Deng at Chao.Deng@wsj.com
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