Global markets again saw volatility as an increase in U.S. initial jobless claims and a rise in consumer prices pushed the U.S. stock markets sharply lower. Renewed market rumors that some European banks may face funding concerns also weighed on global market sentiment.

The risk that the European debt crisis may spread to Italy and Spain, the U.S downgrade and the Fed’s promise to keep interest rates low for the foreseeable future haven’t gone down well with investors. Increasing fear over the U.S. moving into recession has kept the markets on tenterhooks.

China

The Hong Kong/China market traded higher earlier in the week but gains were erased as global market sentiment took a battering. Apart from ongoing concerns over the health of the European financial system, a slump in the U.S. Philly Fed Index raised worries that the U.S. could be nearing a recession.

Chinese Vice Premier Li Keqiang visited Hong Kong and announced new policies that will help internationalize the RMB. On the financial front, it was revealed that exchange-traded funds holding Hong Kong-listed stocks will be available to mainland investors while Hong Kong financial firms will be allowed to buy domestic Chinese securities with their yuan holdings, up to a limit of 20 billion yuan.

Tighter liquidity was evident in China as new RMB loans and M2 money supply continued to shrink in July. With lingering high inflation, tighter monetary policy and expectations for an extension of the home purchase restriction policy to second and third cities, China stocks lacked any momentum.

India

Indian markets continued to drop on fears of another global slowdown. However, India’s industrial production grew at 8.8 percent in June, the fastest pace in three months, beating market estimates. Manufacturing and electricity sectors grew significantly compared with a year ago. Inflation dropped to a 3-month low although still high at 9.22 percent in July, driven by rising diesel and cooking gas costs.

On the corporate front, DLF, one of India’s biggest developers, slumped after India’s antitrust regulator fined the developer 6.3 billion rupees for “abuse of dominance” related to the sale of apartments (Bloomberg, April 17). Within the MSCI India index, only Consumer Staples posted gains while IT and telecom were among the laggards.

This report was provided by Mirae Asset Financial Group.