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Asia shares drop on weak China data

China data

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.82%, Tokyo’s Nikkei declined 0.89%, while the Hong Kong benchmark lost 0.87%

Shares in Asia dropped on Wednesday as weak Chinese economic data reinforced concerns about slowing growth globally as well as in the world’s second-biggest economy amid pandemic and tapering of central banks’ stimulus.

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.82%, extending earlier losses after the release of the Chinese data, while Tokyo’s Nikkei declined 0.89%, moving off a more than 31-year closing-high the day before.

A slew of data out of China showed businesses were grappling with the impact of localised lockdowns following sporadic COVID-19 outbreaks, supply bottlenecks and high raw materials costs. Retail sales grew at the slowest pace since August 2020 and missed analysts’ expectations, while industrial output also rose at a weaker pace from July, underscoring recent signs of slackening economic momentum in China and adding to expectations of more stimulus from Beijing over coming months. Chinese blue chips were 0.73% lower after the data.

The Hong Kong benchmark lost 0.87% dragged down by casino stocks as the gaming hub of Macau begins a consultation ahead of a rebidding of its multi-billion dollar casinos next year. At one point, shares of Wynn Macau were down more than 30%.

Markets also remained focused on the timeline for tapering the Federal Reserve’s stimulus.

There is uncertainty in markets at the moment as investors wait to see what the Federal Reserve will do about tapering their asset purchases, which depends on the state of the labour market and the inflation situation, said Sean Debow Asia CEO of Eurizon Asset Management.

Debow said greater clarity would emerge on both in the coming weeks though for now markets were quick to react to any data points on employment and inflation.

Overnight the U.S. Labor Department reported the Consumer Price Index in August posted its smallest gain in six months, suggesting inflation has probably peaked, aligning with Fed Chair Jerome Powell’s long-held belief that high inflation is transitory.

Lower inflation suggests that the Fed will be under less pressure to begin trimming its asset purchases, and, as a result, the yield on the benchmark 10-year note declined 1.263%, its lowest since Aug. 24.

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