Asia stocks tumble after China PMI, Fed taper; Nikkei plunges 2.5%

Investing.com - Asian stock markets fell sharply on Thursday, after data confirmed a contraction in China’s manufacturing sector and following the Federal Reserve’s decision to taper its monthly bond-buying program by USD10 billion for the second consecutive meeting.

During late Asian trade, Australia’s ASX/200 Index closed 0.78% lower, while Japan’s Nikkei 225 Index ended down 2.45%, while Hong Kong's Hang Seng Index dipped 0.5% and China’s Shanghai Composite index declined 0.8%,

Markets in Shanghai and Hong Kong will remained closed from January 31 to February 5 due to the Lunar New Year holiday.

Asia was given a negative lead from the U.S., where the Dow, S&P 500 and Nasdaq all lost more than 1% as ongoing turbulence in emerging markets saw investors flee riskier assets, such as stocks, and move in to safe-havens, like the yen and U.S. Treasuries.

Emerging markets economies have been hard hit in recent sessions by worries over the impact of cuts in Fed stimulus and concerns over a possible slowdown in China.

The Fed said Wednesday that it would reduce its monthly bond buying program by USD10 billion to a total of USD65 billion a month, in a widely anticipated decision.

The U.S. central bank said growth signals are encouraging, and the unemployment market shows improvement "on balance".

Asian equities were dealt another blow after data released midway through the session showed that China’s final HSBC Purchasing Managers Index inched down to a six-month low of 49.5 in January from a preliminary reading of 49.6.

In Tokyo, the Nikkei sold off as the yen strengthened against the U.S. dollar, dampening sentiment.

USD/JPY fell to 101.83 on Wednesday, re-approaching a seven-week low of 101.75 hit earlier in the week. A stronger yen decreases the value of overseas income at Japanese companies when repatriated, reducing the outlook for export earnings.

Automakers Toyota and Mazda saw shares fall 2.3% and 3.6% respectively, Honda declined 2.5%, while index heavyweights Fast Retailing and Fanuc slumped 1.5% and 3.7%.

Japanese megabanks were also lower with shares of the nation’s largest lender Mitsubishi UFJ Financial Group falling 3.4%, while Sumitomo Mitsui Financial Group and Nomura Holdings retreated 5.3% and 3.9% respectively.

Meanwhile, in Australia, the ASX/200 Index closed lower as losses in the financial sector weighed on the benchmark index.

Commonwealth Banking Group, Australia and New Zealand Banking, Westpac Banking and National Australia Bank all fell around 1% apiece.

Elsewhere, in Hong Kong, the Hang Seng edged lower as investors continued to monitor liquidity conditions in the financial system.

Industrial and Commercial Bank of China fell 1%, while China Merchants Bank and China Citic Bank dropped 1.7% and 2.1% respectively.

Investors have remained cautious over the level of bad debt at Chinese banks, particularly when interbank lending rates are high.

Looking ahead, European stock market futures pointed to a steady open. The EURO STOXX 50 futures pointed to a flat open, France’s CAC 40 futures rose 0.1%, London’s FTSE 100 futures indicated a decline of 0.1%, while Germany's DAX futures advanced 0.2%.

Germany is to produce preliminary data on consumer price inflation as well as a report on the change in the number of people unemployed.

Across the Atlantic, U.S. equity markets pointed to a higher open. The Dow Jones Industrial Average futures pointed to a gain of 0.35%, S&P 500 futures inched up 0.4%, while the Nasdaq 100 futures indicated a rise of 0.75%.

The U.S. is to publish preliminary data on fourth quarter economic growth. The nation is also to release the weekly report on initial jobless claims and data on pending home sales.