Markets slump on weak China data
A FURTHER slowdown in Chinese inflation compounded worries about the world's number-two economy yesterday, adding to selling pressure in Asian markets and extending a global retreat as talk of a United States interest rate hike next month increases.
The below-forecast reading on China's consumer price index - the weakest since May - comes days after Beijing data showed a sharp fall in imports and exports, and is the latest in a string of reports pointing to a growth slowdown in the country.
Officials said prices rose 1.3 per cent last month, down from 1.6 per cent year-on-year in September. Also, the producer price index, a measure of factory gate prices, fell 5.9 per cent - matching the previous two months and marking a six-year low.
The news will add to pressure on Beijing as it struggles to transform the nation's growth model to a more stable one driven by domestic consumption and away from decades of export reliance and state investment.
Liu Li-Gang, the chief Greater China economist at Australia & New Zealand Banking Group in Hong Kong, said the latest data "requires the (People's Bank of China) to engage in more aggressive policy easing".
It also brought an end to a five-day rally in Shanghai, which had been boosted on Monday by news that the authorities will resume initial public offerings this month after a four-month hiatus caused by the summer stock rout.
The market ended 0.2 per cent down - although it pared early hefty losses - and Hong Kong dropped 1.4 per cent, while Sydney, where several firms that rely on Chinese trade are listed, closed 0.4 per cent lower.
However, there was some respite for emerging market currencies, which edged up slightly after being hammered on Monday by last week's better-than-expected US jobs data that ramped up expectations of a Fed rate rise next month.
Traders are betting the US central bank tightens monetary policy despite broad weakness across the global economy, particularly China - a crucial driver of world growth.
"In what is now a regular event, global markets sunk overnight and are pricing in the worst of the US and China," said Michael McCarthy, chief market strategist in Sydney at CMC Markets, in an e-mail to clients.
"According to this view, China continues to weaken toward implosion, but not far or fast enough to head off a lift in US rates," he said, according to Bloomberg News.
On currency markets, the US dollar dipped against most emerging currencies, including the Malaysian ringgit, Indonesian rupiah and South Korean won - each of which suffered most on Monday.
Asia's retreat followed big losses on Wall Street, where the Dow, Nasdaq and S&P 500 each fell one per cent, while there were heavier losses in Frankfurt and Paris.