RTTNews - The four-day winning streak came to an end on Wednesday for the China stock market, after it had added more than 220 points or 5.8 percent on its way to a fresh 15-month closing high. The Shanghai Composite Index slid below support at 3,430 points, and now analysts are expecting the market to move to the downside again on Thursday.
The global forecast could signal selling pressure for the Asian markets, thanks largely to continued profit taking for several of the key bourses following sharp advances last week. Oil, health insurance and telecommunication shares are expected to see additional pressure, with some support coming from bargain hunting among the financials and the properties. The European markets finished firmly in negative territory, while the U.S. bourses ended slightly in the red - and the Asian markets also are tipped to head to the downside.
The SCI finished sharply lower on Wednesday as investors locked in gains from the recent winning streak - particularly among the property and commodity sectors.
For the day, the index lost 42.94 points or 1.24 percent to close at 3,428.50 after trading between 3,385.42 and 3,468.10. The Shenzhen Index lost 121.61 points or 0.87 percent to finish at 13,782.94 for a combined turnover of 361.18 billion yuan. Gainers outnumbered losers by 425 to 385 in Shanghai and 389 to 307 in Shenzhen.
Among the decliners, PetroChina lost 2.19 percent, while Sinopec fell 4.67 percent, Datong Coal shed 5.45 percent and Shenhuo Group dropped 4.83 percent.
The lead from Wall Street is mildly negative as stocks finished Wednesday's session moderately lower after disappointing data on the health of the service sector and the labor market generated some selling pressure. The major averages all closed in negative territory, offsetting some of their recent gains.
Prompting some negative sentiment in the markets was a report from the Institute for Supply Management on activity in the service sector in the month of July, which showed that the pace of contraction in the sector unexpectedly accelerated from the previous month. The ISM said its index of activity in the sector edged down to 46.4 in July from 47.0 in June, with a reading below 50 indicating a contraction in the sector. The decrease came as a surprise to economists, who had expected the index to rise to 48.0.
A separate report released by payroll processor Automatic Data Processing (ADP) showed that private sector employment saw another notable decline in the month of July, although the pace of job losses slowed to its slowest rate since October of 2008. ADP said non-farm private employment fell by 371,000 jobs in July following a revised decrease of 463,000 jobs in June. Economists had been expecting a decrease of about 350,000 jobs compared to the loss of 473,000 jobs originally reported for the previous month.
Meanwhile, the U.S. Commerce Department revealed that factory orders rose 0.4 percent in June, surprising economists, who had expected orders to drop 0.8 percent.
On the earnings front, traders reacted to a mixed bag of earnings, with Procter & Gamble (PG), Kraft Foods (KFT), Ralph Lauren (RL) and Electronic Arts (ERTS) largely beating bottom line estimates while falling short on the revenue front.
The major averages saw a late session recovery attempt fizzle, leading to a negative finish. The Dow closed down by 39.22 points or 0.4 percent at 9,280.97, the NASDAQ slipped by 18.26 points or 0.9 percent to 1,993.05 and the S&P 500 fell by 2.93 points or 0.3 percent to 1,002.72.
In economic news, the People's Bank of China on Wednesday reaffirmed in its second quarter monetary policy report that it will continue to adopt moderately loose monetary policy. The central bank added that it would take steps to maintain appropriate lending growth.
Although signs of a general trend of stabilization are confirmed, the recovery may be slow. The central bank said exiting policies too quickly would weaken economic recovery. On the other hand, a too slow exit could lead to another round of asset bubbles and higher inflation.
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