Stocks in Shanghai dropped 3 percent on Thursday, weighed by speculation China may take more steps to rein in liquidity, slashing the Australian dollar's gains, while copper slid from 10-month highs after disappointing U.S. services data.
U.S. stock futures edged lower as selling of Chinese stocks picked up and U.S. Treasuries climbed, with investors fearing a sentiment shift that would trigger corrective moves lower in risky assets that have had a steep rise in the last five months.
China's central bank late on Wednesday repeated that monetary policy will remain growth friendly, sticking with its view that the recovery was not solid, though said it would use market tools to fine tune policy after unprecedented loan growth in the first six months of the year.
It was very worrisome what happened in the first half of the year. It looked like all stops were pulled for growth, but the question remains at the expense of what in the medium to long term, said Jan Lambregts, head of Asia research with Rabobank Global Financial Markets in Hong Kong.
We could do without another equity bubble in China bursting.
The Shanghai composite index fell 3 percent <.SSEC> in whippy trade, though it still remains up 83 percent on the year.
The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> slipped 0.2 percent, weighed by weakness in technology and consumer-related stocks, which have been leaders throughout the rally. That suggested profit taking was to blame for broad weakness in Asian equities after the index hit 11-month highs reached on Tuesday.
Japan's Nikkei share average <.N225> rose 0.9 percent, led by Honda Motor <7267.T> after a report the world's top motorcycle maker will import bikes from Thailand to sell in Japan to cut costs.
Camera maker Nikon Corp <7731.T> saw its shares plunge 11 percent and be the biggest drag on the Nikkei, after it warned of a loss that would be more than double its initial forecast.
In the United States, network equipment maker Cisco Systems Inc
If we continue to see these positive trends for the next one to two quarters, we believe there is a good chance we will look back and see that the tipping point occurred in Q4, Chambers said.
While this is a very important trend, I would want to see the sequential trends continue for several more quarters before we'd be comfortable with saying that we are returning to normal business momentum, he told analysts on a call.
In currency markets, the Australian dollar briefly was lifted to the day's high after surprisingly strong jobs figures in Australia.
However, it gave up its gains and traded flat at US$0.8411 as the Chinese stock market tumbled.
Australian employment increased by 32.000 jobs in July, surpassing forecasts for a 20,000 drop. That fueled expectations that Australia's central bank will be the first among the Group of 10 countries to raise interest rates.
Sterling was slightly lower at $1.6967 as investors waited to see if the Bank of England boosts its planned asset purchases at a policy meeting later in the day.
Copper prices traded in Shanghai fell 2 percent and three-month copper on the London Metal Exchange slid 2.9 percent to $6,020 a ton, as weak U.S. data for the services sector raised concerns about the pace of recovery.
A gauge of the U.S. services sector, which makes up the sheer majority of the economy, surprisingly reflected weakness in July, contrasting with upbeat manufacturing and investment readings.
(Editing by Kazunori Takada)