TOKYO/SINGAPORE (Reuters): Asian shares resumed their decline after paring early losses on Thursday after a sharp fall in mainland Chinese shares on Wednesday rekindled worries about the health of China’s economy, and investors awaited the result of a meeting of the European Central Bank.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.4% at 0604 GMT. Japan’s Nikkei ended the day down 0.6%.
European markets look set to follow suit, with financial spreadbetters expecting Britain’s FTSE 100 and France’s CAC 40 to open as much as 0.42% lower, and Germany’s DAX start the day down 0.35%.
Thursday’s falls stand in sharp contrast to the recovery in many share markets since last month, which was supported by hopes policymakers around the world may take steps to bolster their respective economies.
Those hopes will be tested in an event-packed period towards the end of the month that starts with the European Central Bank’s policy meeting on Thursday.
ECB President Mario Draghi is widely expected to keep the door open for more monetary stimulus in the face of deflation risks, but is seen stopping short of taking new policy steps at Thursday’s meeting.
That meeting will be followed next week by central bank policy meetings in the U.S. and Japan, as well as four-day leadership meeting of China’s Communist party.
“I think the rebound in markets is coming to an end. From now, markets will be looking to policy events later this month as well as corporate earnings,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
Wall Street stocks lost momentum overnight, with the S&P 500 losing 0.6% despite earlier gains, failing to extend a rally since late last month beyond its 100-day moving average.
Earnings for S&P 500 companies are expected to have fallen about 4% in the third quarter, while revenue is expected to have declined 3.8%, according to Thomson Reuters data.
“The most notable influence on markets recently has been the quarterly reporting in the U.S, which has shown a softening of outcomes relative to expectations,” said Angus Gluskie, managing director of White Funds Management in Sydney.
The Shanghai Composite stock index slumped 3% on Wednesday, its worst daily performance in five weeks after a relatively calm month, reminding investors that China’s markets and economy are still far from stable.
The Shanghai index rose 0.3% on Thursday, however, and the CSI 300 index added 0.4%, while the Hang Seng index dropped 0.8% on Thursday.
The dollar held steady against a basket of six currencies at 95.015 but fell 0.3% to 119.67 yen.
The euro stood at $1.1335, barely moving this week ahead of the ECB’s meeting.