Asian Shares Tumble After U.S. Credit Rating Downgrade

Asian stocks tumbled on Wednesday after various surveys showed factory activity around the world took a further turn for the worse in July.

Investors also fretted over the state of U.S. finances and its debt burden after Fitch downgraded the U.S. government’s credit rating from AAA to AA+, citing fiscal deterioration and repeated debt ceiling standoffs.

The decision sparked a fiery rebuttal from the White House, with press secretary Karine Jean-Pierre saying the move “defies reality.” Treasury Secretary Janet Yellen called the change “arbitrary and based on outdated data.”

The dollar held firm in Asian trading as focus shifted to ADP employment data for July due out later in the day.

Gold edged up on heightened risk aversion, while oil prices rose about 1 percent after industry data showed a huge drawdown in U.S. inventories.

Chinese and Hong Kong markets suffered heavy losses amid the lack of details on China’s stimulus measures.

China’s Shanghai Composite Index dropped 0.9 percent to 3,261.69, while Hong Kong’s Hang Seng Index slumped 2.5 percent to 19,517.38, dragged down by tech stocks.

Videogame developer Tencent Holdings lost 3 percent after China’s cyberspace watchdog announced new measures to prevent kids from spending too much time on phones.

Japanese shares posted their biggest single-day drop this year, with chip-related stocks pacing the decliners.

The Nikkei 225 Index plummeted 2.3 percent to 32,707.69 in its sharpest one-day drop since December 20, while the broader Topix Index settled down 1.5 percent at 2,301.76.

Advantest, Tokyo Electron and Screen Holdings fell 2-4 percent. Brokerage Nomura Holdings plunged 8.5 percent despite reporting a jump in first-quarter net profit.

Toyota Motor rallied 2.3 percent after its first-quarter net profit rose 78 percent from a year earlier.

Minutes of the Bank of Japan’s June policy meeting released earlier today showed that the board agreed on the need to keep ultra-loose policy for the time being.

Seoul stocks lost ground, with the Kospi falling 1.9 percent to 2,616.47, snapping a four-day winning streak on concerns over the U.S. economy.

Steel giant POSCO Holdings led losses to close 5.8 percent lower followed by SK Hynix, which plunged 4.5 percent.

LG Chem, Celltrion, Naver, LG Energy Solution, KakaoTalk, Samsung SDI, Hyundai Motor and Hyundai Mobis fell 2-4 percent. Kakao Bank tumbled 5.2 despite posting solid earnings.

South Korean consumer inflation cooled more than expected in July to its slowest in 25 months, official data released earlier in the day revealed.

Australian markets fell the most in nearly a month, dragged down by financials and commodity-related stocks.

The benchmark S&P/ASX 200 Index dropped 1.3 percent to 7,354.60, while the broader All Ordinaries Index closed 1.2 percent lower at 7,568.40.

Power producer AGL Energy slumped 4.8 percent after Macquarie downgraded its rating on the stock to Neutral from Outperform.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index finished 0.2 percent lower at 11,962.04 after data showed unemployment in the country rose in the second quarter.

U.S. stocks ended mostly lower overnight as caution crept in ahead of key earnings and the U.S. jobs data due this week.

In economic releases, U.S. manufacturing activity contracted for the ninth consecutive month in July and construction spending rose by slightly less than expected in June, while job openings fell to the lowest level in more than two years in June, separate reports showed.

The tech-heavy Nasdaq Composite gave up 0.4 percent and the S&P 500 eased 0.3 percent, while the Dow edged up 0.2 percent to reach its best closing level in well over a year after Caterpillar reported strong second-quarter profits.

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