Asia report: Sour start to September as oil prices drop

Markets in Asia opened September by closing mostly lower on Thursday, with an overnight drop in oil prices dragging sentiment down, and traders seemingly shrugging off better-than-expected Chinese manufacturing data.

Japan’s Nikkei 225 added 0.23% to close at 16,926.84, as the yen weakened.

It was last 0.1% weaker, trading at JPY 103.53 per $1.

On the mainland, the Shanghai Composite lost 0.73% to close at 3,062.97, while the Shenzhen Composite was off 0.75% at 2,017.46.

Chinese manufacturing activity expanded in August, according to two separate reports on Wednesday.

The official manufacturing purchasing managers’ index rose to 50.4 in August from 49.9 a month earlier, moving above the 50 level that separates an expansion from a contraction in sector activity. Analysts had expected no change to the reading.

The Caixin China manufacturing PMI, a separate private gauge of activity in the sector, dropped to 50.0 in August from 50.6 in July.

The official PMI for non-manufacturing was also released, showing a drop to 53.5 in August from 53.9 in July.

“The latest Chinese manufacturing PMI surveys for August did offer up some optimism even though the Caixin measure slowed to 50, down from 50.6,” said Michael Hewson, chief market analyst at CMC Markets.

“The official measure improved slightly to 50.4, almost a two year high, which is encouraging after a fashion, though if 50.4 is a cause for celebration then it merely goes to show that investors are clutching at straws.”

In Korea, the Kospi closed down 0.09% to 2,032.72, while the Hang Seng Index in Hong Kong managed to add 0.81% to hit its highest levels in a year, closing at 23,162.34.

South Korean electronics giant Samsung lost 2.04% during the session, after reports surfaced that its Galaxy Note 7 smartphone was facing even more issues in its supply chain after claims of exploding batteries.

Samsung has put a stop to shipments of the phone to the three largest Korean mobile networks as it initiated further quality testing.

The largely dour mood in Asia followed lower finishes in the US on Wednesday, as a sharp decline in oil prices weighed on the markets.

Brent crude was last down 0.32% at $46.74 per barrel, and West Texas Intermediate lost 0.2% at $44.61.

“While tight ranges remain the theme ahead of payrolls on Friday, equity markets have ended [the month] on a downbeat mood,” said National Australia Bank currency strategist Rodrigo Catril.

“The sharp fall in oil prices appears to have been the trigger.”

Declines came after data from the Energy Information Administration showed a larger-than-anticipated weekly rise in stockpiles, which added 2.3 million barrels last week.

A Reuters-polled forecast had expected a rise of 921,000 barrels.

In Australia, the S&P/ASX 200 lost 0.32% to close at 5,415.60, dragged down by the energy and materials subindexes, which lost 1.64% and 1.65% respectively.

In the energy sector, Santos was one of the big-name losers, falling 3.15%.

New Zealand’s S&P/NZX 50 added 0.3% to 7,423.19, as offshore investors continued to move their capital into the country’s markets, which have seen some serious gains this year.

The down under dollars were both stronger on the greenback, with the Aussie last 0.17% closer at AUD 1.3279 and the Kiwi ahead by 0.18% at NZD 1.3768 per $1.