Asia stocks down as China manufacturing weakens

Asian stock markets were rattled Friday by cautious earnings outlooks from U.S. companies and a further deterioration in Chinese manufacturing.

KEEPING SCORE: Japan's Nikkei 225 was down 0.7 percent at 20,545.98 and Hong Kong's Hang Seng shed 0.9 percent to 25,178.20. South Korea's Kospi dropped 1 percent to 2,045.27. Australia's S&P/ASX 200 fell 0.7 percent to 5,553.70. Southeast Asian markets were lower but China's Shanghai Composite Index rose 0.7 percent to 4,152.29.

CHINA WEAKNESS: China's manufacturing slumped to a 15-month low in July in a fresh sign of deterioration in the world's second biggest economy. A manufacturing index based on a survey of factory purchasing managers fell to 48.2 this month from 49.4 in June. It uses a 100-point scale on which numbers above 50 indicate expansion. Employment in China's giant manufacturing industry, which employs tens of millions of people, continued to shrink.

EARNINGS DISMAY: American companies have mostly reported better-than-anticipated quarterly profits since the start of the month, but many have fallen short when it comes to revenue. Others have issued cautious outlooks, citing the strength of the dollar, a slowing economy in China or falling oil prices. That's giving investors reason to pause.

FED WATCH: Investors are expecting the US Federal Reserve to raise interest rates for the first time since the global financial crisis though views are split on whether that will happen in September or December. Ultra low interest rates have been a boon for stock markets worldwide for several years and the start of US rate hikes is likely to ruffle markets.

THE QUOTE: Whether Fed chair Janet Yellen "initiates lift off in September or December is mere semantics," said Evan Lucas, market strategist at IG in Melbourne, Australia. "The data-dependent Fed has split both the market and economists evenly between these two months. Either way, preparation for the main event of 2015 needs to be front and center of thought," he said in a commentary. "Historically, Asia has rallied into a Fed rate hike before fading and even heading into bear markets following the rate change."

WALL STREET: Disappointing earnings and outlooks from several big companies, including American Express, Caterpillar and 3M helped drag U.S. stocks lower for a third day in a row on Thursday. The losing streak has nudged the Dow Jones industrial average into negative territory for the year. The Dow slid 119.12 points, or 0.7 percent, to 17,731.92. The Standard & Poor's 500 index lost 12 points, or 0.6 percent, to 2,102.15. The Nasdaq composite declined 25.36 points, or 0.5 percent, to 5,146.41.

ENERGY: Benchmark US crude was up 35 cents at $48.80 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 74 cents to close at $48.45 a barrel in New York on Thursday. International benchmark Brent crude was up 25 cents at $55.52 a barrel on the ICE futures exchange in London.

CURRENCIES: The euro fell to $1.0974 from $1.0985 in the previous global trading session. The dollar rose to 123.93 yen from 123.88 yen.