The China stock market gave away just a handful of points on Monday - but that was enough to halt the three-day winning streak in which it had climbed more than 65 points or 2.2 percent. The Shanghai Composite Index finished just above the 2,815-point plateau, and now traders are bracing for further softness when the market kicks off trade on Tuesday.
The global forecast for the Asian markets is broadly negative thanks to persistent debt concerns in Europe and the U.S. Financial are expected to see continued consolidation, along with airlines, properties and steel companies - although investors are expected to continue flocking to gold as a safe haven. The European and U.S. markets finished firmly in the red, and the Asian bourses are tipped to follow that lead.
The SCI finished barely lower on Monday, nudged into the red by softness from the financial shares.
For the day, the index eased 3.48 points or 0.1 percent to finish at 2,816.69 after trading between 2,807.11 and 2,826.96. The Shenzhen Composite Index fell 0.29 points or 0.02 percent to end at 1,232.54.
Among the actives, Industrial and Commercial Bank of China shed 0.9 percent, Bank of China lost 0.3 percent, China Minsheng Banking Corp. fell 0.9 percent and China Vanke dropped 0.8 percent, while Poly Real Estate Group added 0.8 percent and China Merchants Property Development collected 1.7 percent.
Wall Street offers a soft lead as stocks saw considerable weakness on Monday, extending last week's downward move amid continued uncertainty about the U.S. debt limit as well as lingering concerns about the European debt crisis.
Much of the weakness stemmed from concerns about whether lawmakers in Washington will be able to reach an agreement on raising the U.S. debt limit in time to avoid a default.
Fitch Ratings reiterated that it will place the U.S. sovereign rating on Rating Watch Negative if the debt limit is not raised by August 2nd, although the agency said it remains of the opinion that an agreement will be reached to raise the debt ceiling prior to the decline.
The issue of taxes remains a sticking point in the negotiations, with Republicans insisting that they will not accept any tax hikes, while President Barack Obama has called for a "balanced approach" that includes higher taxes on wealthier Americans along with reductions in spending on social programs.
The U.S. is projected to surpass the $14.3 trillion debt limit on August 2nd and could be forced to default if the ceiling is not raised by then. In order for both houses of Congress to pass a bill by the deadline, the framework of an agreement will likely need to be hammered out within the next few days.
Lingering concerns about the European debt crisis also weighed on stocks, as traders continued to digest the results of the stress tests that were released last Friday.
In corporate news, shares of WebMD (WBMD) plummeted by more than 30 percent after the health information provider downwardly revised its full year revenue guidance. With the loss, WebMD fell to its worst closing level in well over a year.
The major averages ended the session well off their worst levels but still closed firmly in negative territory. The Dow fell 94.57 points or 0.8 percent to 12,385.16, the NASDAQ slid 24.69 points or 0.9 percent to 2,765.11 and the S&P 500 dropped 10.70 points or 0.8 percent to 1,305.44.
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