Asian Markets React to Improved Factory Outlook in China

Shares across Asia exhibited mixed performance on Monday, with markets in China experiencing gains following the release of surveys indicating a slight improvement in factory activity. This positive data suggests that China’s manufacturing sector is showing resilience despite the impact of increased U.S. tariffs.

The U.S. Court of Appeals for the Federal Circuit ruled on Friday that former President Donald Trump overstepped his authority by declaring national emergencies to impose extensive import taxes. This ruling has led investors to closely monitor ongoing negotiations between China and the United States regarding a significant trade agreement, which could affect import duties on goods imported into the U.S.

In Hong Kong, the Hang Seng index surged by 2% to reach 25,573.58, while the Shanghai Composite index increased by 0.3% to settle at 3,869.96. A government survey revealed that China’s factory activity improved marginally in August, with the purchasing managers’ index (PMI) rising to 49.4 from July’s 49.3. Although the PMI is still below the 50-point mark that indicates expansion, the data reflects a degree of stability in manufacturing.

Zichun Huang, an economist at Capital Economics, commented on the situation, stating, “The PMIs suggest that China’s economy accelerated last month, thanks to faster growth across manufacturing and services. But we don’t see much upside over the rest of the year.”

In contrast, Japan’s Nikkei 225 index dropped by 2% to 41,849.82, while South Korea’s Kospi fell by 0.8% to 3,161.31. Australian shares also declined, with the S&P/ASX 200 losing 0.7% to close at 8,913.10. Taiwan’s benchmark decreased by 1.1%, while New Zealand’s market gained 0.5%.

On the U.S. side, markets were closed on Monday in observance of the Labor Day holiday. However, on Friday, Wall Street concluded a successful month, even though benchmarks fell short of their recent all-time highs. The S&P 500 experienced a decline of 0.6%, finishing the week at 6,460.26, which still marked a 1.9% increase for August, marking its fourth consecutive month of gains. The index has risen by 9.8% year-to-date.

The Dow Jones Industrial Average also saw a dip, slipping 0.2% to 45,544.88, while the Nasdaq composite fell by 1.2% to 21,455.55. The technology sector faced pressure, as notable declines from major companies overshadowed gains in healthcare and other sectors. For instance, Dell Technologies saw an 8.9% drop following a report showing second-quarter revenue exceeded expectations but highlighted margin pressures and weakness in PC sales. Other tech giants, including Nvidia, Broadcom, and Oracle, also closed lower.

Market reactions were influenced by mixed economic data. The U.S. Commerce Department reported a 2.6% increase in prices for July compared to the previous year, consistent with June’s figures and aligning with economists’ expectations. Excluding volatile categories such as food and energy, prices rose by 2.9%, the highest since February.

Concerns about the broader economy have also emerged. Recent government data indicates a considerable slowdown in hiring since spring, raising alarms among analysts. Additionally, a survey conducted by the University of Michigan revealed a decline in U.S. consumer sentiment for August, which hit its lowest point since May due to worries about rising prices and economic conditions.

Despite the overall market downturn, some companies managed to outperform. Petco Health & Wellness and Autodesk reported better-than-expected quarterly results, with Petco’s shares surging by 23.5% and Autodesk’s climbing by 9.1%.

In commodities trading on Monday, U.S. benchmark crude oil prices decreased by 23 cents to $63.78 per barrel, while Brent crude, the international standard, fell by 28 cents to $67.20 per barrel. The U.S. dollar weakened slightly against the Japanese yen, dropping to 146.93 from 147.00, while the euro appreciated against the dollar, rising to $1.1770 from $1.1682.

As Asian markets continue to react to evolving economic indicators and geopolitical developments, the focus remains on the long-term impacts of trade negotiations and domestic economic conditions in both China and the United States.