Shares, dollar slip as China inflation cools

Asian stocks fell broadly on Wednesday as tepid inflation data out of China added to concerns over slow growth in the world’s second-largest economy.

In addition, the producer price index (PPI), measuring the cost of goods at the factory gate, fell 5.9 percent year-on-year in September, matching August’s six-year low.

The Hang Seng Index climbed 2 per cent, or 448.26 points to 22,888.17, while the mainland-China tracking H-share index tacked on 2.1 per cent, or 218.51 points, to 10,552.93. Smaller rivals and China Telecom will each have about 28 per cent.

“China remains a source of market debate, the bears see a hard landing as inevitable, the bulls continue to see bright spots here and there, and have an unrelenting belief that the PBOC will be the shining white knight riding in with a rate slashing sword to save the day”, Lucas wrote in a note to clients on Wednesday.

Michala Marcussen, head of global economics at Societe Generale, said, “China’s foreign trade data are unlikely to convey any constructive messages just yet”.

In midday trade the Dow Jones Industrial Average was down 0.53 percent to 16,992.19 points. Consumer prices rose 1.6 percent over a year earlier, down from 2 percent in August. Exports shrank 3.7 percent which is indicative of the weak global conditions.

“Considering that emerging economies have been a source of concern for the world economy, their recovery is positive for both emerging economies as well as risk assets as a whole”, Makoto Noji, senior strategist at SMBC Nikko Securities, said in a report. Still, it was still up 7.7 percent so far this month.

“The softness of September’s retail sales figures supports our view that the Fed probably isn’t going to hike interest rates until early next year”, said Paul Ashworth, chief United States economist at Capital Economics. The other three big banks rose between half a percent and 0.9 percent. The discouraging numbers from quarterly results have also been impacting the share price movements in Asian bourse. Domino’s Pizza Enterprises jumped almost 7 percent after announcing the acquisition of French-based pizza chain Pizza Sprint.

However, a few investors drew comfort from the poor data which sparked renewed hope that Beijing could launch another round of stimulus.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3%, while Japan’s Nikkei stock index shed 1.1%.

In a sign that the sentiment towards emerging markets may have turned a corner, the much-tracked Bank of America Merrill Lynch fund flow report showed that weekly outflows from emerging market funds were at their lowest since July.

Emerging market currencies also lost momentum after recent gains. The benchmark NZX-50 index rose 24.31 points or 0.43 percent to close at 5,727.13.

Comments from Federal Reserve officials suggesting the central bank will delay a U.S. interest rate hike until next year were also unable to shore up confidence.