Asian markets dropped on China’s factory output and coronavirus fears

Asian markets dropped on China's factory output and coronavirus fears

After an underwhelming performance for China’s industrial output as well as fears of a second wave, most of the Asian markets had a massive drop.

With the Dow Jones futures showing signs of weakness to start the week, it looks like the majority of the markets are starting to feel its effects especially in Asia and Europe.

The Nikkei 225 in Japan dropped 3.47% while South Korea’s Kospi dropped 4.76%. Hong Kong’s Hang Seng Index declined 2.16% while the S&P/ASX 200 in Australia fell 2.19%.

Over in Mainland China, stocks also traded lower with the Shanghai Composite down 1.02% while the Shenzhen Component shed 0.53%.

To add more tensions to this ongoing coronavirus pandemic, news came in that another outbreak was reported at the Beijing food markets.

China’s industries still struggling despite positive output

Despite the fears of an incoming second wave, China’s industrial output rose for a second straight month in May, per Reuters, as it rose to 4.4%, the highest reading since December according to official data.

The results were smaller than expected which gave a hint that the economy is still struggling. A Reuters poll had expected a 5.0% rise from 3.9% in April, the first expansion since the virus appeared in China late last year.

In addition, analysts are also suggesting that improvements continued to be evident in China—from steel production to more open factories in industrial parks.

However, retail sales fell for a fourth straight month dropping 2.8% due to many closures of shops and restaurants during the pandemic. Heavy job losses and second wave fears loomed among consumers as well.

China showing military and economic strength amid the crisis

Despite the struggles that the world is facing, China was still able to lessen its economic damage compared to the U.S. and it could mean a shift of sentiment in the Asian markets in the near future.

China’s market strength was somewhat evident in today’s trading day as they were able to shed only around one percent or less compared to the major Asia Pacific markets that were shedding over two percent to almost five percent.

In fact, news from CNN last week reported that China may be using this crisis as an advantage to deploy its military forces specifically in areas of the South China Sea.

In addition, the U.S. has been putting a lot of pressure on Chinese firms ever since they got blacklisted in conducting business on their soil. But last week, China was able to list its major tech giant NetEase on Hong Kong’s stock exchange, with having a stellar IPO debut despite the pandemic.

The relationship between the U.S. and China has not shown any signs of improvement as well. With the recent spike of coronavirus cases in the U.S. as well as the recent outbreak in Beijing, an agreement between the two nations is less likely to happen anytime soon.

As per data from Johns Hopkins University, the COVID-19 cases worldwide are almost reaching the 8 million mark, with more reports coming in the U.S. on recent case spikes since the economy reopened.

Featured image courtesy of Erdenebayar Bayansan/Pixabay

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