Asia stocks mostly lower on China PMI, Fed; Nikkei gains on weak yen

Investing.com - Asian stock markets were mostly lower on Thursday, following the release of data showing manufacturing activity in China contracted for the eighth consecutive months in June, while disappointment after a modest extension of stimulus measures from the Federal Reserve further weighed.

Shares in Japan bucked the regional trend, as exporters rose on the back of a weaker yen.

During late Asian trade, Hong Kong's Hang Seng Index fell 0.8%, Australia’s ASX/200 Index dropped 1.1%, while Japan’s Nikkei 225 Index rose 0.8%.

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 a seven-month low of 48.1 in June from a final reading of 48.4 in May, as export orders remained firmly in contraction.

The data remained below the 50.0-mark for the eighth 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.

Meanwhile, the Federal Reserve on Wednesday decided to extend its Operation Twist program, in which it sells short-term bonds to buy long-term ones, disappointing investors who had been hoping for the introduction of the more extreme option of full-blown quantitative easing.

In the statement following its two-day meeting, the Fed said it would extend its holdings of long-term government bonds by USD267 billion until the end of the year in another effort to bring down borrowing costs. The current USD400 billion Twist program is set to expire at the end of June.

Sentiment was also dampened after Fed officials lowered their estimates for economic growth, citing a weak jobs market and a depressed housing sector.

In a press conference following the decision, Fed Chief Ben Bernanke reiterated that, “additional asset purchases would be among the things we’d consider if needed.”

In Hong Kong, shares in property developers and raw material producers were broadly lower following the downbeat China PMI report.

Oil giants PetroChina and CNOOC fell 1.25% and 3.3% respectively, while gold producer Zijin mining Group tumbled 4.6%.

Shares in Evergrande Real Estate Group plummeted 12.5% after stock-commentary website Citron Research said in a report that the real estate firm is “essentially an insolvent company that has consistently presented fraudulent information to the investing public.”

In a statement filed with the Hong Kong Stock Exchange, the Evergrande board denied the allegations.

The fraud allegations weighed on other shares in the sector, with Sino Land dropping 3%, Agile Property Holdings losing 4.95%, while China Resources Land sank 4.55%.

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Meanwhile, in Tokyo, the Nikkei managed to end higher, boosted by a weaker yen and as investors unwound some short positions.

Automakers were broadly higher, with Nissan shares climbing 1.9%, Toyota adding 1.15% and Honda rising 3.45% after Credit Suisse raised its price target on the stock, one day after a ratings upgrade from Nomura.

Shares in troubled chip-maker Renesas Electronics tacked on 3.1% on a report that private equity firms KKR and Silver Lake are in talks to invest in the firm.

Elsewhere, shares in Australia were dragged lower by steep losses in mining firms following China’s weak manufacturing data. The Asian nation is a key export destination for the country’s heavyweight miners.

BHP Billiton and Rio Tinto slumped 1.4% and 1.6% respectively, steel maker OneSteel tumbled 5.9%, while Newcrest Mining declined 4.5%.

Shares in lenders contributed to losses, with National Australia Bank down 1.3% and Westpac Banking Group shedding 1.15%.

Looking ahead, the outlook for European stock markets was downbeat, after the Federal Reserve disappointed expectations for further easing measures, while investors awaited the results of an audit of Spanish banks later in the day.

The EURO STOXX 50 futures pointed to a loss of 0.75%, France’s CAC 40 futures fell 0.7%, London’s FTSE 100 futures declined 0.55%, while Germany's DAX futures pointed to a drop of 0.55% at the open.

Later in the day, Spain was to hold a auction of government debt, while the euro zone was to release preliminary data on manufacturing and service sector growth. In addition, European Central Bank head Mario Draghi was to speak.

The U.S. was to produce government data on unemployment claims, followed by preliminary data on manufacturing activity and an industry report on existing home sales. The country was also to release data on manufacturing activity in the Philadelphia area.