Weak China manufacturing, Fed minutes weigh on world stock markets

A factory along the Yangtze River in China. High Contrast / Wikimedia Commons.

World stocks faltered Friday as China’s manufacturing weakened and the latest Fed minutes reminded investors that U.S. interest rates are likely to rise next year.

Keeping score

In early European trading, France’s CAC 40 dropped 0.7 per cent to 4,235.35 and Germany’s DAX shed 0.5 per cent to 9,424.14. Britain’s FTSE 100 was off 0.4 per cent at 6,667.14. Futures pointed to losses on Wall Street. Dow futures were down 0.3 per cent at 17,604 and S&P 500 futures fell 0.3 per cent to 2,040.40.

China factories

Manufacturing activity in China fell to a six-month low in November, reflecting sluggishness in the world No. 2 economy and weakness abroad, according to the preliminary version of HSBC’s factory survey. The survey comes days after an official report showed that property prices softened in October in all but one of 70 cities tracked across China, falling 2.6 per cent overall. Real estate had been a prime driver of China’s blistering economic growth in previous years but recent weakness in prices suggests economic growth will continue to slip.

The quote

The manufacturing data shows how “choppy” China’s economy is at present, said Stan Shamu, market strategist at IG in Melbourne, Australia. “Investors will have to exercise extreme caution and patience” before diving back into mining stocks which have weakened as China’s economic growth wanes. “Waiting for a sustained recovery before buying stocks is always a better strategy than buying before knowing just how low they will trade.”

Fed minutes

The minutes of the U.S. Federal Reserve’s last policy meeting released Wednesday showed that the Fed decided not to alter its wording on the timing of any interest rate increases. Fed officials worried that a change could be misinterpreted by financial markets. Most economists predict that the Fed won’t raise rates before June. “Investors feel the Fed is continuing to pave the path toward tightening” of monetary policy, said IG’s Shamu.

Asia’s day

Japan’s Nikkei 225 inched up 0.1 per cent to 17,300.86 while South Korea’s Kospi slipped 0.5 per cent to 1,958.04. China’s Shanghai Composite rose 0.1 per cent to 2,452.66 while Australia’s S&P/ASX 200 fell 1 per cent to 5,316.20. Hong Kong’s Hang Seng shed 0.1 per cent to 23,349.64. Markets in Southeast Asia also fell.

Energy

Benchmark U.S. crude was little changed as hopes for an OPEC production cut offset an Energy Department report showing that crude inventories increased far more than expected last week. The front-month contract was up 7 cents at $74.57 a barrel in electronic trading on the New York Mercantile Exchange. It dropped 3 cents to close at $74.58 on Wednesday.

Currencies

The yen continued its slide amid unprecedented Bank of Japan monetary stimulus. The dollar was at 118.46 yen from 118.02 yen late Wednesday. The euro slipped to $1.2516 from $1.2545.