Asian stocks drifted lower on Wednesday, July 8, as doubts over the global economic recovery grows. Jittery investors are taking some money off the table until a clearer picture emerges.

The recent clutch of economic data has not turned out to be as upbeat as projected. Many investors have convinced themselves of an imminent global economic recovery even as they drove equities prices sharply higher in early-March.

Recent data is still supportive of the scenario that the worst of the recession is probably in the past. However, evidence of a recovery has been patchy. For instance, Japan yesterday reported a drop in machinery orders – going against widely held expectations of a small growth.

There are even calls for the US to come up with a second economic stimulus package to shore up the recovery. Investors have placed their hopes on a US consumer-led recovery. But US consumers are not spending as freely as initially expected, instead opting to save gains from the first stimulus package to repair their overextended balance sheets.

The mixed sentiment on the health of the global economy weighed on both equities and commodities. Crude oil futures traded on the New York Mercantile Exchange fell to near US$62 per barrel while other commodities including metals and soft commodities too traded broadly lower. Crude palm oil futures traded on the Bursa Derivatives fell below RM2,000 per tonne.

Sentiment on the local bourse mirrored that in the region. The FBM KLCI opened on a weaker footing and trading was lackluster throughout the day. The benchmark index closed marginally lower at 1,065.

Market breadth was also in the red for the entire trading day. At the close, there were nine losing stocks for every five gaining ones. About 673 million shares were traded. Many investors are moving back to the sidelines as the near term outlook for global stocks turned hazy.