Shanghai Shares Hit Seven-Month Low Amid Manufacturing Slump

Shanghai shares dropped to their lowest in nearly seven months due to poor performance in banking and energy stocks. This followed disappointing data on China's manufacturing activity for August. Investors are also eyeing potential U.S. interest rate cuts and upcoming non-farm payrolls data.

Shanghai shares ended at their lowest levels in nearly seven months on Tuesday, weighed down by banking and energy stocks, while investors assessed disappointing China manufacturing activity data for August.

China's manufacturing activity sank to a six-month low in August as factory gate prices tumbled and owners struggled for orders, an official survey showed. This has pressured policymakers to continue their plans to direct more stimulus to households. Meanwhile, as markets now firmly expect the U.S. Federal Reserve to cut interest rates in September, investors suggest this could give Beijing more leeway to maneuver its own monetary policy.

The focus will be on the U.S. non-farm payrolls data due on Friday, after Fed Chair Jerome Powell last month endorsed an imminent start to rate cuts amid concerns over the labor market. At the close, the Shanghai Composite index was down 0.29% at 2,802.98 points, its lowest closing level since February 6, while the blue-chip CSI300 index was up 0.26%. Banks were among the top losers, with the sectoral index closing 1.76% lower. Four of China's five largest lenders reported lower second-quarter profits after responding to a government nudge to lower lending rates to stimulate weak loan demand amid a slowing economy and struggling property sector.

(With inputs from agencies.)