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China stocks drop on deflationary pressures amid weak demand

China stocks

In contrast, Japan’s stocks climbed on increasing bets that its central bank might not raise interest rates next week

China’s stocks slipped Monday after data showed persistent deflationary pressures as the country’s economy suffers from weak domestic demand.

In contrast, Japan’s stocks climbed on increasing bets that its central bank might not raise interest rates next week.

November inflation figures from China showed a faster-than-expected drop in consumer prices.

The consumer price index dropped 0.5 per cent year-on-year, more than the 0.1 per cent decline anticipated by economists polled by Reuters and the fastest decline since November 2020.

The producer price index dropped 3 per cent year-on-year, compared with October’s 2.6 per cent decline and expectations of a 2.8 per cent drop. It also marked the 14th consecutive month of PPI decline and the quickest since August.

China’s CSI 300 index opened 1.28 per cent down, while Hong Kong’s Hang Seng index lost 0.9 per cent at open. Both indexes lagged the rest of the Asia-Pacific region.

Japan’s Nikkei 225 popped 1.65 per cent, while the broad Topix saw a smaller gain of 1.35 per cent.

Investors were hopeful that the Bank of Japan may not hike interest rates at its monetary policy meeting next week.

Focus for this week will be on the U.S. Fed’s monetary policy decision, where it is largely expected to hold its policy rate steady at the range of 5.25 per cent and 5.5 per cent.

In Australia, the S&P/ASX 200 started Monday 0.21 per cent higher, on pace for a three-month high.

South Korea’s Kospi struggled for direction, was last 0.06 per cent higher and the small cap Kosdaq was 0.92 per cent higher.

On Friday, all three major U.S. indexes gained, with the S&P 500 jumping to reach a new high for the year after the November jobs report and University of Michigan consumer survey data indicated a resilient economy and cooling inflation, fuelling hopes for a soft-landing scenario.

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