Asian Stocks Drop on China Growth Worries

Asian shares were mostly in the red on Monday with Chinese equities leading the declines and US stock futures falling as well, as sentiment turned dull due to worries over US corporate earnings and a slowdown in global economic expansion.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3 percent to $463.66, while Japan’s Nikkei 225 dropped 0.1 percent to ¥21,150.00 after rising 1 percent earlier in the day.

South Korea’s KOSPI shed 1.5 percent to ₩1,996.05, while Australia’s S&P/ASX 500 climbed 1.1 percent to A$5,728.20.

In the US, S&P 500 futures declined 1.7 percent to $2,658.69 and the Dow slipped 1.1 to $24,688.31.

Weakness in Asian stock markets were the result of losses in China’s blue-chip CSI 300 index which stumbled 3 percent to CN¥3,076.89 following lackluster earnings result from the country’s top liquor maker Kweichow Moutai Co. Ltd.

The Shanghai Composite index was also down 2.1 percent to CN¥2,542.10, while Hong Kong’s Hang Seng was up 0.3 percent to HK$24,812.04 after falling earlier in the session.

China’s Slowing Economy

Fresh signs of cooling in the world’s second-largest economy surfaced over the weekend after Chinese data showed industrial companies posted declines in profits for the fifth straight month in September as sales of raw materials and manufactured products weakened.

Industrial profits grew 4.1 percent in September, less than half of the growth rate of 9.2 percent registered in August. The data was in line with the report released last week that showed September’s factory output grew to its weakest pace since February 2016.

A US bank has estimated China’s real economic expansion to slow to 6.4 percent year-on-year in the fourth quarter amid trade headwinds and domestic uncertainties compared to a 6.8 percent growth at the start of 2018.

As lagging indicators, overall industrial revenue and profit should continue to soften accordingly, the bank stated.

US Corporate Earnings Concerns

Broader sentiment in global financial markets has been hit by various negative factors from worsening US-China trade relations to worries over US corporate earnings to Italy’s budget issues and the Federal Reserve’s rate hikes.

Analysts cautioned that more volatility will take place after huge declines across major stock indices left investors with negative returns for the year. Some indices are already in official correction territory amid rising concerns over corporate earnings and global expansion.

A UK asset management firm said the US earnings season is now over halfway through and while headline growth remains strong, there are a number of trends making market participants nervous.

The asset manager cited explicit commentary by Caterpillar Inc., 3M Co., and Ford Motor Co. on the negative impact of US import tariffs as well as lower-than-expected revenue data by Amazon.com Inc. and Alphabet Inc. among major worries for investors.

Several companies have fell behind forecasts this quarter with the beat rate on revenue growth at 44 percent compared with 58 percent in the previous quarter.

European earnings are showing a similar trend, with 43 percent surpassing expectations, the lowest in five years, according to the UK firm, adding that raw materials costs appear to be the main headwind.

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