Asian shares got off on the back foot on Wednesday after weak manufacturing activity reports from both the US and China sent Wall Street reeling, while the dollar steadied after steep losses.
U.S. S&P e-mini equity futures were up 0.7, suggesting that some calm could return to markets later in the global day.
Data showing U.S. factory activity hit a more than two-year low in August added to an already grim mood, coming on the heels of a survey showing China’s manufacturing sector shrank at its fastest pace in three years last month.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4 percent in early trade, while Japan’s Nikkei stock index shed 0.8 percent.
Investors were braced for volatile day in Chinese equities markets, the final trading day before a two-day holiday to commemorate the end of World War II.
On Tuesday, the blue-chip CSI300 index and the Shanghai Composite Index both finished lower, though off their respective steep session lows.
The downturn in markets is based less on rising fears that China’s economy is slowing but is “more that the policy initiatives seem engineered on a daily basis and the plans seem to lack a cohesive, well thought-out process,” Chris Weston, chief market strategist at IG, said in a note.
Last month, Beijing stunned markets with a move to let its currency devalue.
A senior Treasury official urged China to carefully explain its policy changes to financial markets and to shift its economic focus toward consumer spending so that its economy can keep growing.
China’s central bank plans to tighten rules on trading of currency forwards from October, sources with direct knowledge of the matter told Reuters, in a move to curb speculation and volatility after last month’s sudden devaluation.
On Wall Street on Tuesday, U.S. stocks fell nearly 3 percent, with all three major U.S. equity indexes solidly in negative territory for the year so far.
The downbeat U.S. factory figures made it appear less likely that the U.S. Federal Reserve would opt to hike interest rates at its next meeting later this month, with Friday’s nonfarm payrolls report for August awaited to provide more timing clues.
Economists expect the report to show U.S. employers added 220,000 jobs in August, up from 215,000 in July, a Reuters poll found.
Expectations of an eventual increase to U.S. interest rates underpinned the battered dollar, which steadied early on Wednesday after dropping in the previous session as investors bought the perceived safe-haven yen and unwound speculative positions funded in euro.
The dollar was last up about 0.4 percent at 119.80 yen , after skidding more than 1 percent overnight and moving away from last week’s high of 121.76 yen, while the euro slipped about 0.2 percent to $1.1299.
Crude oil futures continued to drop after plummeting 8 percent overnight after the weak Chinese manufacturing data raised fears of slowing demand.
U.S. crude was down 2.2 percent at $44.40 a barrel, while Brent fell 1.7 percent to $48.74.
Spot gold edged down slightly to $1,138.60 an ounce after rising 1 percent in the previous session as the dollar dropped.