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Asian shares track Wall St losses on weak US factory data

ELAINE KURTENBACH

BANGKOK (AP) — Asian shares are lower after U.S. stocks posted their worst loss in five weeks on Wednesday after a surprisingly limp report on the nation's manufacturing that stirred worries about the economic outlook.

Japan's Nikkei 225 index shed 0.6% to 21,758.02 while the Hang Seng in Hong Kong lost 0.4% to 25,980.37. Sydney's S&P ASX 200 gave up 1.3% to 6,658.20.

The Kospi in South Korea sank 1.4%, to 2,044.01 after North Korea fired a ballistic missile toward the sea Wednesday, South Korea's military said, in a display of its expanding military capabilities hours after saying it would resume nuclear diplomacy with the United States this weekend.

The report showed that manufacturing weakened in September for the second straight month as President Donald Trump's trade war with China dragged on confidence and factory activity. It dashed economists' expectations that August's contraction had been an aberration, and stocks and bond yields immediately reversed course to drop sharply lower following the report.

The S&P 500 slumped 1.2% to 2,940.25 for its sharpest loss since August. The Dow Jones Industrial Average fell 1.3% to 26,573.04, and the Nasdaq composite dropped 1.1% to 7,908.68.

Small-company stocks fell more than the rest of the market. The Russell 2000 index lost 2%, to 1,493.43.

In the bond market, the yield on the 10-year Treasury dropped to 1.66% from 1.74% before the report's release, which is a big move. Three stocks fell for every one that rose on the New York Stock Exchange, and gold climbed as investors sought safer ground.

Economists had been expecting growth to resume in September, and they had forecast a reading of 50.4, according to FactSet.

Manufacturers say global trade remains the most significant issue, and all the uncertainty caused by the trade war is hurting exporters in particular. Businesses are unsure what the rules of international trade will be, and it's causing CEOs to pull back on their spending plans. In a separate report, the World Trade Organization said global trade growth will slow to its weakest pace this year since 2009.

"The disappointing data is only fanning long-standing fears of slowing global growth," said Alec Young, managing director of Global Markets Research at FTSE Russell.

Manufacturing is a relatively small part of the economy, but investors worry about whether it will spill into other areas. That puts an even bigger spotlight on Friday's jobs report, which economists expect to show an acceleration in hiring.

Household spending has been a pillar for the economy, particularly when manufacturing and business spending are under threat, and a strong job market helps households keep spending. But uncertainty is looming even there.

A report last week showed that consumer spending rose less than economists expected in August. Two reports on consumer confidence last week gave a mixed picture, with one falling below expectations and the other rising above.

Last month's jobs report was also surprisingly weak, but that may have been a one-off, some analysts say.

"The month of August over the last 10 years has been the wonkiest jobs report of the year," said Philip Orlando, chief equity market strategist at Federated Investors. It often falls below expectations, only for the numbers to be revised higher in subsequent months, he said.

"There's no question the data has been softer, slower, weaker, pick your adjective for today versus a year ago," Orlando said about the broad economy. "But I do think we're going to get through this."

The Fed and other central banks around the world have been aggressive in keeping rates low to shield against the effects of the trade war and slowing global economic growth. The Fed lowered short-term rates twice this summer, down to a range of 1.75% to 2%, the first cuts since the financial crisis was toppling economies around the world in 2008.

Benchmark crude oil rebounded, gaining 56 cents to $54.18 per barrel in electronic trading on the New York Mercantile Exchange. It fell 45 cents to $53.62 a barrel on Tuesday. Brent crude oil, the international standard, picked up 41 cents to $59.30 per barrel.

The dollar rose to 107.87 Japanese yen from 107.73 yen on Tuesday. The euro strengthened to $1.0937 from $1.0934.

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AP Business writers Damian J. Troise and Alex Veiga contributed.