Investing.com – Asian stocks fell during morning trading hours on Thursday on poor Chinese manufacturing PMI and Federal Reserve’s decision to scale back stimulus program.
HSBC’s China manufacturing purchasing managers index for January fell to 49.5 from 50.5 in December and against a forecast of 49.6. The index is an indicator designed to provide an overall view of activity in the manufacturing sector and acts as a leading indicator for the whole economy.
Shares of Chinese Lenovo Group fell 6.9% after the company announced the purchase of Motorola's handset business from Google for $2.9 billion.
Japan’s Nikkei was down 2.57%, China’s Shanghai was down 0.48% and Hong Kong’s Hang Seng was down 0.48%.
U.S. stocks also fell on Wednesday after the Federal Reserve said it was cutting its monthly bond-buying stimulus program to USD65 billion from USD75 billion, while ongoing turmoil in emerging markets also pushed stocks lower.
The Federal Reserve left its benchmark lending target, the fed funds rate, unchanged at 0.00%-0.25% and trimmed USD10 billion from its USD75 billion monthly asset-purchasing program in place to spur recovery.
The Fed is now purchasing USD65 billion in Treasury holdings and mortgage debt a month to help make broader financial conditions more accommodative in order to strengthen recovery.
Economic activity is picking up, the labor market is making some improvement, while recent congressional inability to agree on spending packages is still dragging on recovery albeit less nowadays due to recent compromises.
Such a scenario prompted monetary authorities to taper the Fed's monthly bond purchases, which aim to push down long-term interest rates to boost the economy and send investors to stocks to fuel more corporate investing and hiring.
While talk of tapering the program reflects a view that the economy is improving, it also creates uncertainty as to how stocks will react without a monetary crutch, especially at a time of uncertainty in emerging markets across the globe.
Later today, 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.