Asian stocks extended declines on Wednesday morning (03/02) as oil prices are again flirting with the USD $30 per barrel mark. Overnight, Brent crude fell 4.5 percent to USD $32 per barrel, while West Texas Intermediate plunged 5.5 percent to just below the USD $30 per barrel mark. In combination with concern about the sluggish economy of China it led to another round of global selloff. Overnight the Dow Jones industrial average fell 1.8 percent, the Standard & Poor's 500 index lost 1.9 percent, while the Nasdaq composite index lost 2.2 percent.
Meanwhile, investors are concerned about weak US manufacturing data. Manufacturing activity in the world's largest economy in January contracted for a fourth straight month as factories grappled with a strong US dollar while weak oil prices forced energy companies to further curtail spending. On a positive note, however, the pace of the decline in US manufacturing activity appears to be slowing.
Similarly, China's manufacturing data was disappointing. At the start of the week it was announced that China's official manufacturing purchasing manager's index (PMI) fell to 49.4 in January, down from a reading of 49.7 in the preceding month and also down from analyst estimates (at 49.6). In the first month of 2016 China's manufacturing activity contracted at its fastest pace since August 2012. Meanwhile, growth in China's services sector also slowed. The non-manufacturing PMI in January fell to a reading of 53.5 from 54.4 in the preceding month.
As such, weak manufacturing data in the world's two largest economies (USA and China) and the low oil prices are again heightening speculation of weaker-than-expected global economic growth. In this context riskier assets are always vulnerable, while there usually occurs a flight to safe haven assets.
Indonesia's benchmark Jakarta Composite Index which will open within one hour time is expected to be under pressure due to above-mentioned factors.