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By Stanley White and Tom Westbrook
TOKYO/SINGAPORE (Reuters) – Asian stocks fell on Thursday after soft economic data in China and Japan showed the trade war between Beijing and Washington hitting growth in some of the world’s biggest economies.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3%. Japan’s stock index fell further, dropping 0.8%.
Australia’s S&P/ASX200 wiped earlier gains to close 0.5% higher, while Shanghai blue chips trod water, supported by expectations the gloomy figures would add to the case for stimulus.
European stock futures point to a flat open after recent rises. U.S. futures were down 0.1%, following a record-high close on the on Wednesday.
China’s industrial production growth slowed sharply in October, with the 4.7% year-on-year rise well below forecasts for 5.4%. Investment growth hit a record low and retail sales also missed expectations.
“The weakness in investment and production would suggest that confidence is down,” said Shane Oliver, chief economist at AMP Capital in Sydney.
“It puts more pressure on Chinese authorities to come to a deal with Donald Trump on trade, just as President Trump’s desire to be re-elected puts pressure on him to come to a deal.”
The weak figures also come as market confidence toward a resolution weakens, with a new Reuters poll showing most economists do not expect Washington and Beijing to strike a permanent truce over the coming year.
Trump offered no update on the progress of negotiations in a policy speech on Tuesday. The Wall Street Journal reported on Wednesday that talks had snagged on farm purchases.
Meanwhile, the global fallout from the dispute is widening.
Data due at 0700 GMT will reveal whether Germany has entered a technical recession, as forecast.
Japan’s economic growth hit its slowest pace in a year in the third quarter as soft demand knocked exports.
“Looking around the region, you’ve had some near misses of recession – Korea’s been one, Singapore’s also been one and you’ve got Hong Kong in a recession at the moment,” said Sean Darby, global equity strategist at Jefferies in Hong Kong.
“So it’s not great. It’s not a cycle that is not leaving any scars,” he said.
Worries about spiraling violence as anti-government protests intensify in Hong Kong have also soured investor sentiment.
Protesters paralyzed parts of Hong Kong for a fourth day on Thursday, forcing school closures and blocking highways and other transport links in a marked escalation of unrest in the financial hub.
Hong Kong’s fell 0.8% on Thursday to a fresh one-month low.
In currency markets, safe havens such as the Japanese yen and Swiss franc held on to gains.
The yen was quoted at 108.70 per dollar, close to a one-week high. The Swiss franc traded at 0.9900 versus the greenback, near the highest in more than a week.
The Australian dollar skidded to a one-month low on Thursday after a worryingly weak reading on employment re-ignited speculation about another cut in interest rates.
futures rose 0.6% to $62.76 a barrel while U.S. West Texas Intermediate (WTI) crude gained 0.63% to $57.48 per barrel.
The yield on benchmark rose to 1.8652% compared with its U.S. close of 1.869% on Wednesday.
(GRAPHIC: Trade war toll – https://fingfx.thomsonreuters.com/gfx/mkt/12/8644/8569/Pasted%20Image.jpg)