Asian markets retreat as China, Fed feed caution


HONG KONG (AFP) – A mixed reading on Chinese inflation Thursday kept Asian equities traders on edge in fresh volatility Thursday as markets retreated from a two-day rally, while fears of a US interest rate hike saw safe assets advance.

Early selling spread through regional exchanges, with Hong Kong and Shanghai seeing hefty losses, despite Chinese Premier Li Keqiang the day before seeking to shore up confidence in the government s handling of an economic crisis that has sent global markets plunging.

A late tumble on Wall Street provided extra reason to run after a report showing a tighter US jobs market increased speculation the Federal Reserve will pull the trigger on a rate rise at next week s policy meeting.

Thursday s losses follow thumping gains across the world over the previous two days — including a 7.7 percent jump in Tokyo Wednesday — which were helped by Chinese moves to bolster its economy.

However, Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors Ltd. in Sydney, told Bloomberg News: “Markets will remain volatile until the Fed meeting next week.

“Investors are again focusing on the potential US interest rate increase and how it would impact emerging markets.”

In Beijing, official figures showed the consumer price index (CPI) rose two percent last month, better than July s 1.6 percent and beating forecasts of 1.8 percent.

However, the producer price index (PPI) — a crucial measure of costs for goods at the factory gate and a leading indicator of the trend for consumer prices — slumped at its fastest rate in six years.

The figures will do little to ease the struggle authorities have in kickstarting the world s number two economy and main driver of global growth as it suffers a painful slowdown.

“This is a real problem,” said Zhu Qibing, a Beijing-based analyst at China Minzu Securities Co. “For a manufacturer, CPI represents its costs because wages rise, and PPI represents the prices of its product. Now profits of enterprises are being further eroded.”



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