 "A woman stands in front of a display showing market indices at the Tokyo Stock Exchange")
Asian stocks fell on Thursday after lackluster Chinese and Japanese economic data added to heightened worries about slackening global growth, sapping investors’ appetite for riskier assets.
With the fresh slide in Asian equities, spreadbetters forecast a lower open for Britain's FTSE, Germany's DAX and France's CAC. The latest policy response to rising global risks came from the Reserve Bank of New Zealand (RBNZ), which cut its benchmark rate by 25 basis points to 2.75 per cent and signaled more easing if China's economy slows further.
Those risks were highlighted in Thursday’s data. China's consumer inflation in August edged up, but producer prices fell for the 42nd straight month in the latest sign that deflation remains a significant risk for the world’s second-largest economy.
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Furthermore, Japan's key gauge of capital spending unexpectedly fell for a second straight month in July, signaling that the economy is struggling to get back on track after contracting in the second quarter. With many economies facing headwinds, ANZ bank economists revised down their global growth forecasts for 2016 and 2017, expecting growth to remain around 3.5 per cent “over the next couple of years.”
“Previously we had growth edging up to 4 per cent by 2017. In the near term the risks are skewed to further downward revision,” the economists at ANZ wrote.
Amid the somber mood, the previous day's policy-hopes driven surge in the Shanghai Composite Index . SSEC flagged and the shares fell were down 0.4 per cent. The losses were limited for now, however, as soft indicators fanned expectations for extra government stimulus.
MSCI's broadest index of Asia-Pacific shares outside Japan was 1.4 per cent lower after rallying 3.2 per cent on Wednesday. South Korea's Kospi .KS11 bucked the trend and rose 0.6 per cent. Australian shares fell two per cent, weighed down by sagging banking stocks.
“I think those Chinese concerns are still front and center,” said Damien Boey, equity strategist at Credit Suisse in Sydney.
“It's not just Australian banks, it's developed world banks that are actually taking a hit on China concerns,” Boey said. Tokyo's Nikkei .N225 fell 2.7 per cent in the wake of the downbeat Japanese machinery orders numbers, after jumping 7.7 per cent the day before amid hopes for fresh government stimulus. "The Bank of Japan may ease policy further in October, but additional easing would not be enough to achieve its inflation target,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.
Elsewhere, Standard & Poor's stripped Brazil of its investment-grade credit rating on Wednesday, further hampering President Dilma Rousseff's efforts to regain market trust and pull Latin America's largest economy from recession.
While the RBNZ rate cut was widely anticipated, the central bank also said a further fall by the New Zealand dollar was "appropriate", sending the kiwi buckling.
The New Zealand dollar dived about 2 percent and last fetched $0.6278 NZD=D4, moving back towards a 6-year low of $0.6200 struck late in August.
The Australian dollar suffered collateral damage and retreated 0.3 percent to $0.6996 AUD=D4.
The U.S. dollar was little changed at 120.60 JPY= yen and the euro was steady at $1.1211 EUR=.
The Turkish lira TRYTOM=D3 hit a fresh record low of 3.0620 versus the dollar amid lingering domestic political uncertainty.
Downbeat data from Asia's largest economies weighed on oil, with U.S. crude CLc1 sliding 0.7 percent to $43.85 a barrel after a bruising 4 percent decline overnight.
Oil prices are off more than 50 percent since June 2014, with a global supply glut also weighing heavily on the commodity.
In recent weeks, oil rallied in volatile trading after falling to 6-1/2-year lows when a stock market slide in China sent global equities and commodities prices tumbling.
