China s PMI numbers add to Asian markets woes

Asian stocks were dragged lower after China’s PMI reading pointed to more contraction, contrary to market expectations.

The regional MSCI Asia Pacific index was 0.6% lower in early afternoon Tokyo trading. Australian shares finished the session around 0.3% lower, weighed down by the large names.

China’s Shanghai Composite fell by a similar 0.3% while the Kospi shed 0.4% and the Taiex down 0.7%. Hong Kong’s Hang Seng was 0.6% lower – these figures all at the time of writing heading into the closing few hours.

The unofficial read into China’s manufacturing industry – HSBC Flash PMI – printed at 48.7 for May compared to 49.3 in April.

Today’s data  along with weak data from Japan and Taiwan yesterday, add to concerns that growth in Asia is in danger as the world grapples with the threat of Greece’s exit from the euro.

The Euro continues to struggle against all other major currencies, last buying 125.72 US cents. The Australian dollar was similarly weak at 97.52 US cents while the dollar yen was close to its morning levels, last at 79.49.

In regional corporate news, Rio Tinto’s head of Iron Ore reiterated the global miner’s plans to continue investing in expanding its production despite market speculation that Chinese steel mills have started asking for shipment deferrals.

Contrary to those reports, Rio Tinto said it remains on track to incrementally increase output to 450 million tonnes per annum by 2016 – a target that many are starting to doubt. Rio Tinto shares finished marginally higher at A$56.36.

Also in the iron ore space, Fortescue Metals founder Andrew Forrest weighed into the European debt situation, saying there has been some exaggeration to the current state of the problem, remaining hopeful that things can be bedded down relatively quickly. Fortescue shares finished almost 2% lower, continuing from recent losses.