Asian stocks fell on Monday, reversing four months of gains, as signs of deepening economic troubles in China continued to weigh on market sentiment.
Major indexes in Australia and China declined, while South Korea’s markets remained mostly unchanged. Hong Kong’s benchmark index dropped, led by a 12% slump in New World Development Co. shares after the property developer warned of its first annual loss in two decades. Japanese stocks bucked the trend, rising on stronger-than-expected corporate earnings.
US stock futures also edged lower, pointing to a possible downturn for the S&P 500 after Friday’s gains. The moves suggest growing caution among investors as they await key US economic data later this week.
The latest figures from China underscored the challenges facing the world’s second-largest economy. The Caixin China manufacturing index rose more than expected, but failed to lift sentiment after official data showed a fourth consecutive monthly contraction in factory activity. Meanwhile, new home sales data highlighted a worsening slump in China’s property market. China Vanke Co., one of the country’s largest developers, reported its first half-year loss in more than 20 years.
The situation has raised concerns about the broader impact on Asian markets. Taiwan, Thailand, and Indonesia all reported weaker manufacturing data, adding to signs of slowing regional growth.
September is historically a volatile month for global markets, and this year could follow that pattern. The Cboe Volatility Index (VIX), Wall Street’s “fear gauge,” has risen each September for the past three years. Options traders have already spent more than $9 million hedging against market swings, reflecting fears of further turbulence.
Investors are also focused on the US Federal Reserve, which is widely expected to begin cutting rates this month. Data released on Friday showed the core personal consumption expenditures price index, the Fed’s preferred inflation measure, rose at a mild pace, reinforcing expectations of a 25 basis point cut, with some seeing a one-in-four chance of a 50 basis point reduction.
“In this environment, good economic news could be a positive for riskier assets,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “A strong US jobs report could support stocks and the dollar if the Fed opts for a measured pace of rate cuts.”
Commodities also reflected caution in the markets. Oil prices fell amid signals that OPEC+ plans to increase output from October, even as China’s economic challenges grow. Gold prices also slipped.
With key economic data and central bank meetings on the horizon, investors are bracing for a potentially volatile month as they navigate a landscape marked by uncertainty and mixed signals from global policymakers.
