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Asian stock markets ended Monday higher.
Just before the open, the markets received a powerful stimulus to growth from U.S. President Barack Obama’s announcement of a framework agreement to lift the nation’s debt ceiling and avert a sovereign default sparked a relief rally.
This growth was curbed by released data on China’s PMI Manufacturing. Official survey by the China Federation of Logistics and Purchasing earlier showed a drop in the nation’s PMI to 50.7 in July from 50.9 in June, but remained above the threshold of 50, indicating an expansion. Then HSBC reported its July China manufacturing purchasing managers’ index fell to 49.3 from 50.1 in June.
HSBC noted the China’s manufacturing activity signaling deterioration in the operating environment at the nation’s factories as tighter monetary conditions weigh further on the sector.
Statistics by HSBC also showed Taiwan’s PMI eased to 46.1 in July from 49.9 in June, while India’s monthly manufacturing PMI declined to 53.6 from 55.3 in June. The reading for South Korea was 51.3, which HSBC said has been “broadly unchanged” over the last three survey periods.
The Taipei index weighed by sharp losses in Formosa Plastics Group firms after a weekend fire at a refining complex of Formosa Petrochemical Corp.
Today the banking sector was among the main leaders: Westpac Banking Group Ltd. added 1.9% in Sydney, Sumitomo Mitsui Financial Group Inc. increased by 2.9% in Tokyo. HSBC Holdings PLC climbed by 0.5% in Hong Kong, after announcing a deal to sell 195 of its U.S. retail branches to First Niagara Financial Group Inc. for approximately $1 billion in cash.
The U.S. debt agreement news boosted oil prices and, as a result, shares of in the region’s energy producers: Inpex Corp. +0.7% in Tokyo, Woodside Petroleum Ltd. +1.4% in Sydney, Cnooc Ltd. +0.9% and PetroChina Co. +1.6% Hong Kong.
European stock markets closed the first day of the week on dark mood.
On Monday the European markets appeared under pressure from data on EU and UK business activity, which missed analysts’ estimates, reinforcing concerns about countries’ economies in Europe. Moreover the IMF lowered its forecast for UK GDP 2011 to 1.5% from April's forecast of 1.75%.
Market plaers also worried that agreement on the US debt deal might not be sufficient to placate the rating.
The main factor to fall was a report by the Institute for Supply Management (ISM), which showed a slowing manufacturing business activity that missed median estimates.
Banking sector suffered substantial losses: in London shares of Royal Bank of Scotland Group PLC and Lloyds Banking Group PLC showed a decrease of 4.5% and 5%, respectively, in Frankfurt Deutsche Bank AG’ shares fell by 3.9% and Commerzbank AG’ – by 5.2%, in Paris shares of BNP Paribas SA – by 3.9% and Societe Generale SA’ - more than 4%.
As most financials slid, shares of heavily weighted HSBC Holdings PLC managed to hold on to a 2.2% gain after posting a 35% gain in first-half net profit and saying it will cut 30,000 jobs. Its pretax profit rose 3.3%, topping forecasts.
HSBC also announced its plans to sell 195 retail branches in upstate New York to First Niagara Financial Group Inc. for around $1 billion.
Shares of BMW AG lost 3.9% on Monday.
Auto-related stocks also sold off sharply, with tire maker Michelin declining 4.2% despite earlier UBS upgraded the company’s shares from Neutral from Sell.
US equities also closed lower on Monday.
The markets were under pressure amid weak ISM manufacturing and concerns that rating agencies may downgrade US credit rating despite the US debt ceiling agreement.
The decline was curbed by reports that on the weekends the U.S. Republicans and Democrats reached an agreement on hiking debt ceiling and deficit reduction. According to the agreement, the debt limit may be raised by $2.1 trillion and the federal deficit may be cut by $2.5 trillion. over the next 10 years.
Economy: The Institute for Supply Management (ISM) reported the pace of growth in the U.S. manufacturing sector slowed more than expected in July while new orders hit their lowest level since 2009 (50.9 in July vs. est. 53.0 and 55.3 in June).
The US construction spending added 0.2%, up from estimated advance by 0.1% and June rise by 0.3%.
On Monday top losers were defense and healthcare companies amid US governments decision to cut federal spending.
Shares of HSBC Holdings PLC (HBC) added 1.6% after the London-based bank announced it will eliminate 25,000 jobs by 2013. The bank has already trimmed 5,000 jobs. The job cuts are seen as a positive, since they help the bank reduce costs. HSBC also posted a solid profit.
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