RTTNews - Shanghai Stocks May Face Lower Opening
The China stock market on Tuesday snapped the losing streak that had reached four sessions and cost it more than 220 points or 6.3 percent in the process. The Shanghai Composite Index moved back above the 3,260-point plateau, but now investors are bracing for the market to turn back to the downside at the opening of trade on Wednesday.
The global forecast for the Asian markets is fairly pessimistic as investors are likely to be cautious ahead of the Federal Open Market Committee's comments on Wednesday about the state of the U.S. economy. Financials and properties are likely to be under pressure, along with some of the resource stocks. The European and U.S. markets finished sharply lower, and the Asian bourses are also expected to trade to the downside.
The SCI finished modestly higher on Tuesday, boosted by gains among the financials and the food stocks.
For the day, the index was up 14.97 points or 0.46 percent to close at 3,264.73 after trading between 3,222.71 and 3,273.02. The Shenzhen Index gained 163.46 points or 1.26 percent to finish at 13,137.11 for a combined turnover of 193.19 billion yuan. Gainers outnumbered losers by 553 to 297 in Shanghai and 509 to 226 in Shenzhen.
Among the actives, Kweichow Moutai added 3.98 percent, while Qingdao Haier surged 6.36 percent, Guangdong Media Electric Appliances jumped 6.54 percent, Ping An Insurance eased 0.27 percent and Jiangxi Copper dropped 2.99 percent.
Wall Street offers a negative lead as stocks posted notable losses on Tuesday, with traders doing some additional profit taking ahead of key economic data due out in the second half of the week. The major averages all ended the day firmly in negative territory, adding to the moderate losses posted in the previous session.
On the economic front, traders largely shrugged off the Labor Department's report showing a much bigger than expected increase in productivity in the second quarter. The growth came as hours worked fell at a faster pace than output. At the same time, the report also showed a steep drop in unit labor costs. The report said that productivity increased by 6.4 percent in the second quarter compared to a downwardly revised 0.3 percent increase in the first quarter. Economists had expected productivity to increase by 5.5 percent.
Meanwhile, the Labor Department also said that unit labor costs fell by 5.8 percent in the second quarter following a revised 2.7 percent decrease in the first quarter. The steep drop in costs exceeded the expectations of economists, who had expected a 2.5 percent drop.
Separately, the Commerce Department released a report showing that wholesale inventories fell by much more than expected in the month of June, although the report also showed a modest increase in wholesale sales. The report showed that wholesale inventories fell 1.7 percent in June following a revised 1.2 percent decrease in May. Economists had expected inventories to fall 0.9 percent compared to the 0.8 percent drop originally reported for the previous month.
Traders are also looking to the two-day Federal Open Market Committee meeting that began today, although the Fed's rate decision is not expected to be revealed until tomorrow afternoon. The central bank is widely expected to keep the fed funds futures rate unchanged. However, the Fed's commentary on growth and inflation and any additional information on quantitative easing measures have the potential to move the markets.
The major averages all ended the day notably lower, although they were well off their worst levels of the day. The Dow closed down by 96.50 points or 1 percent at 9,241.45, the NASDAQ slipped by 22.51 points or 1.1 percent to 1,969.73 and the S&P 500 fell by 12.75 points or 1.3 percent to 994.35.
In economic news, China's consumer price index dropped 1.8 percent year-on-year in July, after a 1.7 percent fall in the preceding month, the National Bureau of Statistics said Tuesday. Economists expected a 1.7 percent drop. At the same time, the producer price index or PPI fell 8.2 percent annually in July, faster than a 7.8 percent fall in the preceding month, but slower than the 8.3 percent fall expected by economists.
Also, industrial production in China rose 10.8 percent in July from a year earlier. This comes after a 10.7 percent growth in June, and was lower than economists' expectations of an 11.7 percent rise. At the same time, retail sales rose 15.2 percent in July from a year earlier, accelerating from June's 15 percent growth rate.
Urban fixed-asset investment between January and July rose 32.9 percent from a year earlier, slowing from the first half's 33.6 percent rise. The growth rate was also lower than the median estimate of a 34 percent increase.
Finally, the Customs Bureau said in a report that Chinese exports declined for the ninth consecutive month in July. Exports were down 23 percent in July from the same period of the prior year, following June's 21.4 percent decline. Meanwhile, imports dropped 14.9 percent, larger than the 13.2 percent decrease seen in June. Exports totaled US$105.4 billion and imports stood at US$94.8 billion, resulting in a surplus of US$10.6 billion.
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