Asia stocks mostly down as China manufacturing slows

Hong Kon - Asian markets mostly fell on Monday as China shares were dragged down by poor manufacturing figures and investors followed a drop on Wall Street.

The survey of Chinese manufacturing activity showed a drop to a two-year low in July, suggesting the world's second largest economy faces challenges in the third quarter.

Shanghai was down 1.71%, Tokyo lost 0.48%, Sydney eased 0.46% and Hong Kong dropped 0.84%. Seoul was 0.90% lower.

In Japan, investors were weighing earnings while energy-related shares were pushed lower as oil extended its biggest monthly drop in seven years.

Investor sentiment in China reflected the final reading of Caixin's Purchasing Managers' Index (PMI), which came in at 47.8 for July.

The figure was below the 49.4 registered in June and was the weakest reading since 47.7 in July 2013, according to previous data, with a figure above 50 signalling growth and anything below indicating contraction.

An official purchasing managers' index released at the weekend had already showing a decrease for the month, decelerating to 50.0 from 50.2 in June.

Asian markets also got a negative lead from Wall Street where stocks closed lower on Friday following poor earnings from ExxonMobil and Chevron and a fall in oil prices.

The Dow Jones Industrial Average slipped 0.31%, while the broad-based S&P 500 dropped 0.22%. The tech-rich Nasdaq Composite Index edged down 0.01%.

Technology and energy companies slumped in Shanghai, while analysts predicted China's government would further ease credit in the second half of 2015 in an attempt to shore up growth.

"Fiscal policies will be the key to growth stabilisation measures in the second half," Zhu Qibing, a Beijing-based macroeconomic analyst at China Minzu Securities, told Bloomberg News.

"The government's recent signals and policy direction clearly show that a new round of fiscal stimulus is coming," he said.

In Tokyo forex trade, the dollar was at ¥124.06 early on Monday compared with ¥123.91 in New York late on Friday.

The euro bought $1.0976 and ¥124.01 against $1.0984 and ¥136.10 in US trade.

Oil prices were lower in Asian trade over concerns about a supply glut. US benchmark West Texas Intermediate for September fell 27 cents to $46.85 while Brent crude for September eased 30c to $51.91.

Bloomberg News reported Iranian Oil Minister Bijan Namdar Zanganeh as saying output could increase by 500 000 barrels a day within a week after international sanctions are eased and by one million barrels a day within a month after that.

Gold fetched $1 094.57 an ounce compared with $1 098.40 on Friday.