Asia report: Stocks tumble as Chinese inflation tops forecasts

Asia-Pacific stock markets were almost all in the red at the end of trading on Monday, with Chinese stocks leading the losses after inflation data came in higher than expected.

In Japan, the Nikkei 225 was down 0.61% at 26,821./52, as the yen weakened 0.8% against the dollar to last trade at JPY 125.33.

Of the major components on the benchmark index, automation specialist Fanuc was down 0.54%, fashion firm Fast Retailing lost 2.73%, and technology conglomerate SoftBank Group slid 2.69%.

The broader Topix index lost 0.38% by the end of trading in Tokyo, closing at 1,889.64.

On the mainland, the Shanghai Composite tumbled 2.61% to 3,167.13, and the smaller, technology-centric Shenzhen Composite slid 3.33% to 2,011.45.

Fresh data out of China showed both producer and consumer prices rising faster than expected in March.

The official producer price index was up 8.3% year-on-year, while the consumer price index advanced 1.5% over the same time in 2021.

Both of those measures were well above expectations, with economists polled by Reuters having pencilled in growth of 7.9% and 1.2%, respectively.

“China is not entirely immune to global price shocks, despite an enviably low rate of inflation compared to almost every other major economy,” said Pantheon Macroeconomics chief China economist Craig Botham.

“Rising food and energy prices proved more than enough to offset weaker core inflation in March, though the food story is at least partially about base effects.”

Botham noted that food inflation in March was a negative 1.5%, up from a negative reading of 3.9% in February, despite lower pork prices, as vegetable and grain prices rose.

“For now, food is still a drag on overall inflation, but that drag is decreasing, and we expect a positive contribution from April onwards.”

Energy inflation was not reported, Craig Botham said, but Pantheon estimated that it rose to 31.7% in March from 27.6% in February, to contribute 1% to total headline inflation, up from 0.8% previously.

“We expect inflationary pressure from energy to hit a peak in April and then subside, given the retreat of international oil prices and a gradually rising base for comparison.

“This increase in inflation is entirely a cost-pull story, with demand distinctly soggy.”

Botham said services inflation slowed to 1.1% in March, from 1.2%, and core inflation was unchanged at 1.1%.

“Given the hit to demand from zero-Covid policies in March, this is no surprise, and seems set to continue in April.

“Slowing PPI inflation, too, should translate to lower core inflation, even if the relationship is a weak one.”

Elsewhere, South Korea’s Kospi was off 0.27% at 2,693.10, while the Hang Seng Index in Hong Kong lost 3.03% to 21,208.30.

Chinese electric car maker Nio led the moves south in the special administrative region, closing 11.44% weaker.

That came after the firm said it was suspending production, as the ongoing Covid-19 outbreak in China was having a serious effect on its supply chain.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics up 0.15%, while SK Hynix lost 0.45%.

Oil prices were in the red at the end of the Asian session, with Brent crude futures last down 2.36% on ICE at $100.35 per barrel, while the West Texas Intermediate quote on NYMEX lost 2.52% to $95.78.

In Australia, the S&P/ASX 200 was the region’s odd one out, eking out gains of 0.1% to 7,485.20, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was down 1.11% at 11,932.03.

The down under dollars were both weaker against the greenback, with the Aussie last off 0.11% at AUD 1.3421, and the Kiwi retreating 0.06% to NZD 1.4613.