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Asian Stocks Stumble as Chinese Economic Data Disappoints and Stimulus Remains Limited

Hong Kong, Aug 16 (Reuters) – Asian stocks faced a setback on Wednesday as disappointing Chinese economic data and the absence of significant stimulus from Beijing continued to weigh on investor sentiment. The European market is also expected to open lower for another day, with FTSE futures down 0.15% at 0527 GMT. E-mini futures for the S&P 500 index, on the other hand, were relatively stable.

According to MSCI’s gauge of Asia Pacific stocks outside Japan, stocks declined by 1.17% to an 11-week low. China’s new home prices recorded their first decline this year in July, indicating a rapid loss in economic momentum and emphasizing the need for more aggressive policy support to boost economic activity.

Furthermore, on Tuesday, China reported weaker-than-expected July activity data, and later announced that it would no longer publish youth unemployment data, which further weakened confidence in Beijing. The People’s Bank of China (PBOC) unexpectedly lowered its policy rate on Tuesday, surprising many investors. This move followed a series of disappointing data on loans, credit, the housing market, and the trust industry, as well as concerns about deflation.

Investors’ sentiment towards China has significantly deteriorated, according to Redmond Wong, a Greater China market strategist at Saxo Markets. Wong expressed particular concerns regarding the decline in China’s retail sales and weak infrastructure investments, which suggest a lack of local government funding.

Both China and Hong Kong stocks experienced declines, with the Hang Seng Index down as much as 1.39% and China’s blue-chip CSI 300 Index 0.45% lower. John Milroy, an investment adviser at Ord Minnett, believes that the Chinese Central Bank is not doing enough to reduce interest rates and encourage banks to lend more, which is necessary to stimulate consumer activity.

In Japan, the Nikkei 225 index slipped 1.3% to a two-month low, with banking shares facing downward pressure following a report from ratings agency Fitch on the potential downgrade of major U.S. banks. Similarly, Australia’s S&P/ASX 200 index fell nearly 1.5%, the largest drop in approximately six weeks.

Later in the day, markets will receive further updates on major economies, including Britain’s inflation data and Federal Reserve minutes. The eurozone will also announce preliminary second-quarter gross domestic product figures, which are expected to show modest growth of 0.2% and a decline in industrial production.

Analysts at Commonwealth Bank of Australia (CBA) anticipate that the Bank of England will continue to increase interest rates to curb high core inflation, even if it leads to a recession. They believe that the lack of a significant turnaround in UK core inflation might overshadow the impact of higher interest rates and possibly result in a decline in GBP/USD towards the end of the year.

On Tuesday, all three major U.S. equity indexes closed lower following stronger-than-expected U.S. retail sales data. The data increased the likelihood of the Federal Reserve maintaining high interest rates for a longer period, bolstering the strength of the U.S. dollar and putting pressure on riskier currencies such as the Australian and New Zealand dollars.

In the commodities market, U.S. crude fell by 0.36% to $80.7 a barrel, while Brent declined by 0.35% to $84.59 a barrel. Spot gold, on the other hand, saw a slight increase of 0.14% at around $1,904.2 an ounce.

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