Nikkei Plummets, Asian Stocks Under Pressure

The Central Bank could shrink its bond-buying program in the US “in the next few meetings” according to Fed Reserve Chairman Ben Bernanke's comments yesterday. This put pressure on Asian stocks overnight. The surprisingly weak PMI data from China did not help. The data showed a contraction for the first time in 7 months. The figure fell to 49.6 this month from April’s final figure of 50.4. It pressured the stocks downwards while the USD strengthened. Many investors are wary about China’s economic situation, especially about the forecasts for 2013’s GDP.

The weak data from China hit the Asian stocks hard with Japanese stocks crashing down to their lowest level since both the massive earthquake and the Tsunami in 2011.

Stocks
During the late Asian session the Hong Kong Hang Seng dropped 2.3 percent, Australian ASX/200 closed 2 percent down and the Japan Nikkei 225 tumbled 7.3. The New Zealand NZSE 50 also declined on the news and the Shanghai Composite dropped 1.32 percent.

In Europe this morning the stocks were also lower after mostly weak releases from Germany and France. While Markit’s German service Purchasing Managers Index gained below expectations of 50.0 (up to 49.8 from 49.6 last month in France the PMI gained to 45.5 from 44.4 last month beating expectations of 44.8. The EURO STOXX 50 were down 2.25 percent, the French CAC 40 fell 2.18 percent and the German DAX 30 2.20 percent on the weak sentiment following the Chinese report.

The US stocks were lower on Wednesday following the Fed reserves minutes. The DJIA closed down 0.52 percent, the S&P 500 finished 0.83 percent lower and the Nasdaq lost 1.11 percent.

Forex
The USD became a safe place for investors wishing to avoid the equities. The EUR/USD lost 0.14 percent, the USD was down 1.09 percent against the yen. The dollar also gained against the AUD – 0.86 percent and the CAD -0.16 percent. Meanwhile following yesterday’s weak data from the UK the GBP continued its descent losing 0.07 percent against the USD.

Commodities
After the Fed Reserve testimony both gold and crude oil moved lower with investors taking advantage of cheap precious metals. The data from China also pushed down the Copper by 1.96 percent while natural gas gained on warm weather in the US.

What To Watch
A string of important Purchasing Managers Index data is coming out of Europe today, giving investors not too much time to focus on China and the US. This will affect the euro. Then later FOMC’s Bullard will speak as well as ECB’s Draghi. Jobless claims will come out of the US. Lots of key data moving the assets today.