Risk sentiment was hit by conflicting January manufacturing data from HSBC/Markit and CFLP. The official Purchasing Managers Index produced by the China Federation of Logistics and Purchasing (CFLP) showed PMI rose for the second month in a row to 50.5 in January from 50.3 in December, as holiday demand continued to boost production. A reading below 50 shows contraction of industrial activities. The CFLP said the strengthening in the PMI index was a result of the Chinese New Year holidays, which boosted everything related with consumption, from tobacco to beverages to food.
On the other hand, HSBC/Markit data showed a further deterioration in Chinese manufacturing sector operating conditions, with both output and new business falling further over the month. The HSBC Purchasing Managers Index (PMI) registered 48.8 in January, broadly unchanged from Decembers reading of 48.7, and a level indicative of a moderate deterioration in Chinese manufacturing sector conditions. The headline index has now posted below the 50 no change mark, signaling contraction, for three months in succession.
Sentiment was also undermined by weak US economic reports as well as mounting uncertainty about Greece debt default. US home prices, as reflected by the S&P/Case-Shiller index, fell 0.7% on a seasonally-adjusted basis in November. Meanwhile, US consumer sentiment, as measured by the Conference Boards consumer confidence index, fell to 61.1 in January from 64.8 in the previous month.
Hopes that Greece would strike an agreement overnight with its private creditors to restructure its debt receded as the day went on without a deal despite the Greek Prime Minister Lucas Papademos saying that progress had been made.
Investors also became increasingly nervous that Portugal might be the next country requiring a second bailout and debt restructuring as yields rose to fresh record highs. Standard & Poors increased the number of Portuguese banks on credit-watch negative after it cut the sovereign rating of the country. Sentiments were also hit after Italy raised less than its maximum target at a bond sale on Tuesday following Fitch Ratings downgrade of the nations credit rating last week.
The Australian stock market ended in deep red, weighing the broader All Ordinaries index down by 0.8%, registering third day of consecutive fall, as investors took profits ahead of the reporting season and after robust rally in January. The Australian equities market added around $65 billion in value in January, one of the best performing first months of the calendar year since 1970.
Australian miners and energy companies were the days worst performers after commodity prices fell overnight, while banks were down after ratings agency Fitch put Australias big four banks on a credit downgrade watch because of their strong reliance on overseas funding. Industrial stocks were largely mixed despite the AIG /PWC Australian Performance of Manufacturing Index showing manufacturing activity in January expanded for a second consecutive month. On the other side, media shares got a boost from news that Gina Rinehart, Australias richest woman, has been trying to buy a 10% stake in Fairfax for A$192 million.
The Tokyo stock market ended tad higher after swung between gain and losses on Wednesday, as strength in domestic demand issues mostly offset by yen appreciation against the euro and the US dollar as well as worse-than-expected earnings forecast from major heavyweight companies.
Shipping companies advanced, boosted by Mitsui OSK after Jefferies Group Inc lifted its target price for the company to 400 yen from 380 yen. Mitsui O.S.K. gained 5.9% to 305 yen, Kawasaki Kisen Kaisha 5.6% to 152 yen, and Nippon Yusen K.K. 5.7% to 204 yen
Honda Motor recovered 0.3% to 2,674 yen, despite slashing its annual profit guidance to 200 billion yen, citing hurt by the cost of natural disasters in Japan and Thailand and a strong yen. Hondas stock was down as much as 2.8% in early trade.
All Nippon Airways gained 6.8% to 237 yen after raising its full-year operating profit forecast 29% to 90 billion yen as it speeds cost cuts. ANA posted third quarter operating profit of 41 billion yen.
Ricoh Co slid 6.7% to 600 yen after copier manufacturer posted a third quarter operating loss of 34.8 billion yen and revised down its full-year earnings forecast to 18 billion yen loss from a prior projection of 37 billion yen profit and slashed its annual dividend by 24% to 25 yen per share.
Shiseido erased 2.9% at 1,359 yen after Japans largest cosmetics maker net profit for the nine months ended December shrank by 36%. Company has trimmed its full-year outlook, due mainly to the write-down of deferred tax assets and weaker domestic demand.
TDK fell 1.4% at 3,585 yen after the firm said its operating profit would be just 10 billion yen in the current FY ending March, down from its prior forecast of 35 billion yen profit.
The Chinese marked ended in deep red, with the benchmark Shanghai Composite index down by 1.1% at 2,268.08, as risk aversion selloff across the board with mining, energy, industrials, and financials stocks led retreat after PMI report from CFLP and Markit painted a mixed picture of the countrys manufacturing conditions.
Materials and resources stocks took the brunt of the decline as concerns over their overcapacity persist and on tracking weaker global metal prices. Shenzhen Zhongjin Lingnan Nonfemet lost 4.7% to 9.09 yuan, Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech 3.9% to 44.73, and Jiangxi Copper 3.8% to 24.47 yuan. Oil & coal producers were lower. Shares of Coalmines declined on concerns over falling coal prices amid the slowing domestic economy. Henan Shenhuo Coal & Power slumped 6.1% to 10.18 yuan, Beijing Haohua Energy Resource 4.3% to 18.94 yuan, and Yanzhou Coal Mining 2.8% to 23.49 yuan.
In India, Key benchmark indices moved into positive terrain to hit fresh intraday highs in mid-afternoon trade as European stocks opened higher. The barometer index, BSE Sensex, was up 28.76 points or 0.17%, up about 160 points from the days low and off close to 10 points from the days high. Index heavyweight Reliance Industries (RIL) held positive zone as the companys share buyback programme starts from today, 1 February 2012. The market breadth was strong. M&M rose after reporting strong auto sales in January 2012. Capital goods stocks rose. PSU OMCs fell after cutting jet fuel prices by over 3% as an appreciating rupee made imports cheaper. Bank shares also dropped.
Among other Asian bourses, the Hong Kong hang Seng Index fell 0.3% to 20,333.37. Indonesia Jakarta Composite index added 0.6% to 3,965. Singapore Strait Times index dropped 0.07% to 2,904.8. South Korea KOSPI was up 0.2% to 1,959.24. Taiwan TAIEX index escalated 0.4% at 7,549.21.
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