Asia stocks mostly lower on China PMI, EU debt woes; Nikkei flat

Investing.com - Asian stock markets retreated on Thursday, following the release of data showing manufacturing activity in China contracted for a seventh month, while concerns over the euro zone’s debt crisis remained following a summit of European leaders.

During late Asian trade, Hong Kong's Hang Seng Index fell 0.35%, Australia’s ASX/200 Index dipped 0.3%, while Japan’s Nikkei 225 Index ended flat.

Midway through the session, data showed that China’s HSBC Flash Purchasing Managers Index, the earliest indicator of the country's industrial activity, declined to 48.7 in May from a final reading of 49.3 in April, as export orders were firmly in contraction.

The data remained below the 50.0-mark for the seventh consecutive month, adding to concerns over a deepening slowdown in the world’s second largest economy.

A deeper slowdown in China would impair a global expansion that is already faltering because of the euro zone’s ongoing debt crisis.

European Union leaders discussed measures to bolster growth in the region and the proposed joint issuing of euro bonds but some members, including Germany, remained opposed, arguing that it would lessen pressure for heavily indebted countries to get their finances in order.

Leaders reiterated that they want Greece to remain in the euro area, but urged the country to honor its commitments to austerity measures and the reforms demanded under its bailout program.

The likelihood of Greece leaving the euro has been growing since early May, when anti-bailout political parties deprived pro-austerity parties of a majority at the polls. New elections are planned for next month.

In Hong Kong, shares in property developers and financial sector stocks were mixed, as hopes for fresh monetary easing by China to prop up growth remain following the disappointing PMI data.

Bank of China Hong Kong shares added 1.5% and Hang Lung Properties rose 1.6%. But shares in Sun Hung Kai Properties dropped 0.8% and Industrial and Commercial Bank of China dipped 0.5%.

A 2.4% drop for index heavyweight China Mobile weighed on the Hang Seng.

Meanwhile, in Tokyo, the Nikkei managed to erase earlier losses to close flat, following a sharp rally in late afternoon trade, triggered by a bout of short-covering and modest bargain buying.

Shares in Renesas Electronics rose 1.9% following a Yomiuri Shimbun report that the struggling chip maker is planning a chip production tie-up with Taiwan Semiconductor Manufacturing.

But shares in exporters remained under pressure, with Canon falling 2.2% and automakers Honda and Nissan down 0.9% and 1.4% respectively.

The Nikkei is down more than 16% since hitting a one-year high on March 27, after rallying more than 19% in the first three months of the year, as China’s economic growth slowed and on renewed concern about Europe’s debt crisis.
 
Data from Japan's Ministry of Finance released earlier showed foreign investors sold a net JPY131.3 billion of Japanese stocks last week, their fifth straight week of net selling.     

Elsewhere, shares in Australia turned modestly lower following China’s manufacturing data. The Asian nation is a key export destination for the country’s heavyweight miners.

BHP Billiton and Rio Tinto came off their highest levels of the session, but managed to post gains of 0.4% and 0.25% respectively.

Shares in lenders contributed to losses, with ANZ Banking Group down 0.8% and National Australia Bank losing 0.75%.

Looking ahead, the outlook for European stock markets was upbeat, as markets looked set to rebound from the previous day’s sharp sell-off.

The EURO STOXX 50 futures pointed to a gain of 0.65%, France’s CAC 40 futures rose 0.9%, London’s FTSE 100 futures advanced 0.9%, while Germany's DAX futures pointed to a gain of 0.9% at the open.

Later in the day, the euro zone was to produce preliminary data on manufacturing and service sector growth, while Germany and France were also to release individual reports. In addition, European Central Bank President Mario Draghi was to speak.

Also Thursday, the U.S. was to release official data on core durable goods orders and initial jobless claims.