Global stock markets declined on Tuesday, while oil prices snapped a three-day rally after data showed manufacturing activity in China contracted at the fastest rate in three years.
The Asia Pacific indices were down across the board, led by a more than 700 point plunge for the Nikkei 225. The Tokyo benchmark settled at 18,165.69, declining 3.8%.
Hong Kong’s Hang Seng index fell nearly 500 points or 2.2% to 21,185.43. The Shenzhen Shanghai CSI 300 was down 0.1%.
European stocks declined across the board, with major indices in Frankfurt, London, Paris and Madrid declining by 2.3% or more. London’s FTSE 100 was down 155.26 points or 2.5% at 6,092.68. The DAX in Frankfurt fell 274.18 points or 2.7% to 9,985.28.
In economic data, China’s manufacturing sector declined in August, raising fresh fears about a protracted slowdown in the world’s second-largest economy. The country’s official manufacturing PMI fell to 49.7 in August from 50.0 the previous month. A PMI reading below 50.0 signals contraction.
Separately, the Caixin China manufacturing PMI edged up slightly to 47.3 in August from 47.1, but remained well below the 50.0 level that separates contraction from expansion.
Non-manufacturing activity also weakened in August, signaling a broad slowdown in the Chinese economy. The non-manufacturing PMI fell to 53.4 in August from 53.9, data showed.
A weaker Chinese economy also weighed on the price of oil, which snapped it strongest three-day rally since 1990. Global benchmark Brent crude fell $2.03 or 3.8% to $52.12 a barrel on the ICE Futures exchange in Europe. US crude was down $1.81 or 3.7% to $47.39 a barrel on the New York Mercantile Exchange.
Global volatility also weighed on the US dollar, which declined for a second consecutive day against world currencies. The dollar index fell 0.2% to 95.60 in the European session.
The dollar fell sharply against the Japanese yen and euro.
The USD/JPY plunged 1.2% to 119.75 after regaining the 121.00 level late last week.
The EUR/USD advanced 0.4% or 48 pips to 1.1257, extending its winning streak to two days.
In economic data, the Eurozone manufacturing sector expanded at a consistent rate in August, with employment rising at the fastest rate in four years. Markit’s final Eurozone manufacturing PMI came in at 52.3 in August, down slightly from July’s 52.4.
Germany’s PMI index rose to 53.3, a 16-month high.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.