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Why Asian Markets Started This Week on a Weaker Note

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Economic calendar

9:45 AM EST – US Markit composite PMI (purchasing managers’ index) (January)

9:45 AM EST – US services PMI (January)

10:00 AM EST – US ISM non-manufacturing PMI (January)

11:00 AM EST – European Central Bank President Draghi speaks

7:01 PM EST – U.K. BRC retail sales monitor (January)

Asian markets opened lower on Monday following a pullback of major US indices on Friday.

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China

China’s Shanghai Composite Index (SSE) pulled back last week and broke the six-week gaining streak. Following the pullback, the Shanghai Composite Index opened lower on Monday but recovered its losses as the day progressed and closed positive.

The market sentiment was weak last week amid increased caution in the global markets. Concerns about inflation and the US market pullback caused the Shanghai Composite Index to fall on Monday despite the release of stronger-than-expected services PMI data over the weekend. According to Markit, China’s Caixin services PMI increased to 54.7 in January—higher than the expected reading of 53.6. The rally in banking and transport stocks offset the weak sentiment in the market. Weakness in consumer stocks limited the market gains. Increased profit-booking in liquor stocks also weighed on the index.

The Shanghai Composite Index rose 0.73% and closed the day at 3,487.50 on February 5. The SPDR S&P China (GXC) fell 1.6% on February 2.

Hong Kong

After breaking a seven-week gaining streak last week, Hong Kong’s Hang Seng Index (HSI-INDEX) carried forward the weakness and opened this week lower. Speculations about aggressive policy tightening from global central banks sparked inflation concerns and weighed on the Hang Seng Index. Although the market started to recover, weakness in energy and IT sectors limited the up move. Amid a pullback on Monday, the Chinese buying Hong Kong shares through Chinese exchange links surged to 6.5 billion yuan on Monday—higher than the average daily buying worth 4 billion yuan recorded in January.

On February 5, the Hang Seng Index fell 1.1% and closed the day at 32,229.00. The iShares MSCI Hong Kong (EWH) declined 1.6% on February 2.

Japan

Japan’s Nikkei Index (NIK-INDEX) declined for two consecutive trading weeks and started this week on a weaker note. Following the sharp decline in US markets, the Nikkei Index opened lower on Monday. Despite the yen’s weakness on Monday, major export stocks declined. Weakness in the food, shipbuilding, and chemical, petroleum, and plastic sectors pushed the market lower.

On February 5, the Nikkei Index fell 2.5% and closed the day at 22,686.00. The iShares MSCI Japan (EWJ) fell 1.5% on February 2.

Next, we’ll discuss how European markets performed in the early hours on February 5.

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