Asia Markets Spooked By China Concerns And U.S. Interest Rate Fears

Asian Markets Fall

Asian markets fell in early trading Monday after lower-than-expected export numbers from China and concerns of a U.S. interest rate hike.

The Nikkei in Japan fell 0.4 percent while the MSCI Asia Pacific Index dropped by a tenth of a percent. South Korea’s market fell 0.3 percent.

China reported this weekend that exports fell 8.3% from 2014, fueling fears that one of the world’s largest economies is in the midst of a growing crisis.

The country’s second-quarter growth did hit the government’s 7% target but that fell short of expectations driven by the country’s recent economic history. Maintaining that number for the entire year would mean the worst growth rate since the early 1990s, and while 7% is certainly not bad, its relative weakness could have political consequences in Beijing.

That’s because of what is increasingly looking like systemic trouble in the Chinese economy. The government, for example, has been unable to arrest the slide in share values and other indicators, like the exports number. Some expect an opening of the fiscal floodgates in a further attempt to reverse the slide.

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“The government is now pushing infrastructure spending,” economist Yang Zhao told the Wall Street Journal. “I think the government will be more proactive in its fiscal spending in the months ahead.”

But taking on so much more debt – China’s total debt stands at about 250% of its gross domestic product – has its own dangers. Xi and his officials in Beijing could be playing with fire as they try desperately to put another one out.

And on Friday, the Bureau of Labor Statistics announced that the U.S. economy added 215,000 jobs in July, continuing a solid, if unspectacular, run. That news likely means that the Federal Reserve will seriously consider raising rates when it meets in September, making for the first such increase above the current zero-level since 2008.

Because of that expectation, American stocks fell on Friday with the Dow Jones down 1.8% and the Nasdaq down 1.7%. Those losses helped encourage a rough Monday morning in the Asian markets.

Written by Gene Giannotta

Gene Giannotta is a writer based in Washington, D.C. He reports on economic policy, finance and business news.