Asian markets struggle as growth worries replace trade hopes

July 3: Uncertainty over the global economy weighed on Asian markets Wednesday as the tailwind from the China-US trade ceasefire petered out, while oil prices struggled to claw back the previous day's hefty losses.

While some tensions on trading floors have eased since Donald Trump and Xi Jinping's proclamation that negotiations were back on, analysts pointed to long-running concerns about weak growth and central banks' willingness to act.

Shanghai was one of the biggest losers after the head of the People's Bank of China appeared to temper expectations for near-term stimulus measures for the world's number two economy.

Yi Gang said growth was near potential, interest rates were about right and monetary policy was accommodative enough to absorb various situations.

"Gang sent more hawkish signals by tempering expectations for significant credit growth in (the second half of) 2019" following the positive outcome of the Trump-Xi meeting, said Stephen Innes at Vanguard Markets.

"If this is true, it's horrible for a market that was positioning for a fillip from a PBoC policy response and a noteworthy shift from his dovish remarks just a few weeks ago that there is 'tremendous room' for additional policy stimulus in China."

The remarks come soon after data showed factory activity in China continued to shrink in June, adding to worries about the key driver of global growth as economies struggle to deal with the effects of the trade war.

Traders are also nervously awaiting the Federal Reserve's next policy meeting this month, with a 25 basis point cut in borrowing costs largely priced into markets, but with many hoping for double that figure.

The release of US jobs data on Friday is now in investors' sights, with a weak reading likely to put pressure on the bank to announce slash deep this month.

AFP/APP