Asia: Markets lower despite China easing manoeuvers

Japan's Nikkei slumped on Tuesday while Hong Kong saw a rollercoaster day as protests reared back after being thought to be winding down.

Hong Kong police and pro-democracy demonstrators clashed after police attempts to remove barricades surrounding the financial district were met with increased protests and reinforcing the barricades.

On Tuesday morning, hundreds of police arrived to the street with chainsaws and attempted to drag down the remaining barricades.

From their office window Rabobank analysts described their "bird’s-eye view of Hong Kong police failing to disperse Occupy protestors; key blocked roads now have many more bamboo barriers in place, rather than less".

Leaders of the pro-democracy movement and students had been due to meet with government officials on Friday but the talks were called off, prompting more people to take a stand.

Mainland Chinese press reported the protests were delaying the launch of the Shanghai-Hong Kong Stock Connect scheme.

On the upside, the People's Bank of China provided some relief to markets with some policy easing manoeuvres.

The central bank cut its 14-day repo rate to 3.4% from 3.5%, its second cut in less than a month. The bank also drained 20bn yuan in liquidity via open market operations.

“It shows that the central bank is under rather strong pressure to ease monetary policy as it seems like the government still considers financing costs in the economy too high,” said JP Morgan strategist Gu Ying.

The Hang Seng closed down 0.41% while the Shanghai composite index was down 0.28%.

Chinese trade data the previous day were significantly better than expected, but "rather odd", said Rabobank.

Export growth surged to 15.3% year-on-year, much higher than the 12% consensus, yet import growth of 7.0% also dwarfed the consensus prediction 2% fall.

"On the export side it appears China is trying to squeeze sales out of every 'other' market it can (for example, sales to Iran contributed 0.8 percentage points to that figure, while sales to Mozambique were up 47.8% year-on-year).

"However, there are limits to how successful that strategy can be when the US, EU, Japan, and ASEAN are all not buying much. Meanwhile, the import side appears to have been boosted by an iPhone 6 effect rather than reflecting an upturn in domestic demand.

"Indeed, China’s Q3 GDP next week looks likely to be disappointing."

Japan, Australia, India

Tokyo's stock market reopened following the national Happy Monday holiday for health and sports, Taiiku no hi.

But the Nikkei was in poor health by the end of the day as it finished 2.38% lower as the yen strengthened further against the dollar.

Looking forward, the yen is expected to ease, says Credit Suisse, where the forex team sees downside to the yen, forecasting dollar-yen rate of 118 on a 12-month view.

Further south, commodity prices continued to provide support for Australian stocks, and the Aussie was showing some strength despite the central bank's attempts to talk the currency down.

In India, headline consumer price inflation was just 6.5% year-on-year, lower than consensus and down from 7.7% in August, and is expected to decline further from that level due to falling oil prices, leading to speculation of a potential rate cut.