Asia: Stocks end lower as China concerns continue to weigh

Asian stocks closed in the red on Wednesday amid further evidence of a slowdown in China’s economy.

Two separate reports showing a contraction in Chinese manufacturing on Tuesday fuelled fears on the nation’s flagging economy.

Shanghai plunged 4.39% at the beginning of Wednesday's session but heavy losses were erased to end down 0.20% ahead of the World War II remembrance holiday on Thursday and Friday when the index will be closed.

FXTM Research Analyst Lukman Otunuga said the World War II 70th anniversary commemorations will provide the market with “some breathing space after receiving continual punishment over the past couple of weeks”.

“The closure might be used as a period where policymakers in China get together and discuss policy measures that could be taken to stabilise the China markets,” Otunuga added.

The drop in Shanghai inspired declines in Hong Kong and Japan with the Hang Seng finishing 2.24% lower and the Nikkei ending down 3.84%.

The recent market volatility caused by China has prompted some analysts to push back expectations for an interest rate hike by the Federal Reserve.

“I expect a September rate hike to be highly unlikely given the Chinese economic slowdown and subsequent market volatility, said IG analyst Joshua Mahony.

"This week will only get more volatile and more unpredictable as we approach the business end of the week, which culminates in Friday's US jobs report. There does not appear to be any major economy which is particularly outperforming on the global stage, and with the Chinese crisis yet to fully feed into Western economic data, central banks will no doubt be braced for unsteady times ahead."