BANGKOK (AP) — Asian stock markets sank Tuesday despite an upbeat report on U.S. service industries that are the main driver of growth in the world's No. 1 economy.
Confidence dimmed even though the Institute for Supply Management said U.S. services activity expanded in July at the fastest pace in five months. Its index rose to 56 points from 52.2 in June, the highest reading since February and above market expectations. Any reading over 50 indicates expansion and the higher the number, the stronger the growth.
The findings echoed a surge in the manufacturing sector in July, but weren't enough to overcome jitters about job growth, which remains sluggish. On top of that, analysts said, factory production could fall back a bit, since last month's report also showed a reduction in order backlogs.
"With employment still expanding albeit at a slower pace, and backlog of orders contracting, there is still cause for a side of caution with all that optimism," said Sterne Agee analyst Lindsey Piegza in a commentary.
Japan's Nikkei 225 index fell 1.4 percent to 14,064.16. Hong Kong's Hang Seng dropped 1.7 percent to 21,835.17. South Korea's Kospi shed 1 percent to 1,897.01. Australia's S&P/ASX 200 lost 0.4 percent to 5,087.80. Benchmarks in mainland China, Singapore, Taiwan, New Zealand and the Philippines also fell.
Investors were also displaying caution as they try to determine when the U.S. Federal Reserve might be ready to rein in its monetary stimulus plan.
Economists expect the Fed to start cutting back in September or October on its monthly purchases of $85 billion in bonds. The Fed has been pumping money into the U.S. economy for more than four years in an effort to keep interest rates down and help boost lending. The program has been a boon to stocks, where investors have fled in search of higher returns.
On Wall Street on Monday, the Dow fell 0.3 percent to 15,612.13. The S&P 500 fell 0.2 percent to 1,707.14. The Nasdaq composite index gained less than 0.1 percent, to 3,692.95.
Benchmark crude for September delivery was down 30 cents to $106.26 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 38 cents to close at $106.56 on the Nymex on Monday.
In currencies, the euro rose to $1.3262 from $1.3252 late Monday. The dollar fell to 97.93 yen from 98.30 yen.
Follow Pamela Sampson on Twitter at http://twitter.com/pamelasampson