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Nikkei Markets

Asian stocks fall more, dragged down by Chinese automakers

Better-than-expected US jobs data continue to damp risk asset demand

HONG KONG (Nikkei Markets) -- Asian shares outside of Japan extended losses on Tuesday as investor sentiment continued to be marred by the changing outlook on U.S. Federal Reserve's stance.

The Nikkei Asia300 Index of companies declined 0.4% to 1,302.88, adding to yesterday's 1.7% fall. Chinese carmakers were among the worst performers on the gauge. Guangzhou Automobile Group lost 3.1% and Dongfeng Motor Group slid 2%. Geely Automobile tumbled 3.8% after saying it expects a 40% decline in first-half profit amid a bigger-than-expected decline in overall sales volume in the Chinese automobile market. The carmaker cut its current sales volume target by 10%.

Asian equities struggled on Tuesday after the S&P 500 Index yesterday fell by the most in two weeks. Risk assets have not performed well following data that revealed that U.S. employers were adding jobs at a healthy clip. The rebound in U.S. hiring last month has led traders to recalibrate expectations surrounding the Fed's July 30-31 meeting.

The odds that the U.S. central bank will cut rates by 50 basis points at that meeting -- an outcome that was quite plausible prior to the U.S. jobs data -- is now negligible. While a 25 basis-point rate cut is still priced in, a few analysts reckon that too may not materialize.

Fed Chair Jerome Powell will offer the outlook on U.S. monetary policy to lawmakers on Wednesday and Thursday.

"Given the relatively strong data flow, we expect Powell to push back against market pricing for a July cut," Bank of America Merrill Lynch said in a note. "If Powell wants to push back against market pricing, he can make the case that the data have been better than expected."

The Fed will likely wait until September to deliver a rate cut, it added.

Not helping risk appetite was a Wall Street Journal report on Monday. The newspaper said that while American and Chinese negotiators are set to speak this week to revive stalled trade talks, previous disagreements between the two sides "threaten to bog down discussions."

An index of Chinese companies listed in Hong Kong closed 0.7% lower. China Construction Bank fell 0.8%.

Apple suppliers came under pressure after shares of the iPhone maker fell yesterday following a brokerage downgrade. Largan Precision fell 2.3% and Hon Hai Precision Industry slipped 1.4%

Shares of Singapore Exchange ended little changed. The bourse operator made a strategic investment in Smartkarma, a Singapore-based fintech that operates an investment research platform amid efforts to boost interest in SGX-listed stocks. SGX did not disclose the value of its investment or the stake it will take in Smartkarma. Meanwhile, the company said that Singapore June total securities market turnover by value declined 5% month-on-month.

Tata Consultancy Services, India's biggest software company, fell 2.1% ahead of its June quarter earnings.

--Nimesh Vora

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