Asia: Shares end down, dented by US rate hike fears and soft China inflation data

Asian shares fell on Tuesday as speculation of an interest-rate hike by the Federal Reserve later this year weighed on sentiment, while soft Chinese inflation figures sparked concern about the health of the world’s second-largest economy.

Last Friday's better-than-expected nonfarm payrolls report has added weight to expectations that the Fed will raised rates in September.

The Shanghai composite index closed down 0.4%, while Hong Kong's Hang Seng ended 1.2% lower.

Data out of China showed that consumer price inflation rose at an annualised 1.2% in May, down from 1.5% in April and falling short of the expected 1.3%.

Meanwhile, producer price index deflation remained at 4.6% year-on-year in May, unchanged from April, which was also weaker than expected.

Although the disappointing Chinese data fuelled expectations for more monetary easing, much of this is already priced into stocks, according to analysts.

Nomura said: “Subdued CPI inflation reflects still weak domestic demand and leaves room for further policy easing. With PPI deflation lingering, there is little inflationary pressure in the pipeline either.”

“We continue to expect two more benchmark interest rate cuts and two more reserve requirement ratio cuts over the rest of 2015, with the next move most likely coming in July,” it added.

Investors in China were also wary ahead of a decision by the MSCI due late on Tuesday on whether to include China’s mainland securities in its benchmark emerging market index.

In commodities, China's copper imports fell 16.3% in May from the previous month, hitting a three-month low. Chinese exports of unwrought aluminium and products jumped 21% on an annualised basis to 410,000 tonnes.

In corporate news, China Construction Bank fell 1.49% and Agricultural Bank of China was down 1.7%.

Galaxy Entertainment, a hotel and casinos operator in Macau, fell 3.7% as Sterne Agee analyst David Bain said gaming revenue in the city was down 46% to $410m this month.

In Japan, the Nikkei 225 ended down 1.8% as a stronger yen against the dollar hurt Japanese exporters.

In economic data, the consumer confidence index released by the Cabinet Office fell slightly for the second consecutive month to 41.4 in May from 41.5 the month before, driven by rising food prices.

Australian shares were hurt by China’s inflation figures, which weighed on the mining and financial sectors and pushed the S&P/ASX 200 index down 0.5%.

Figures released on Tuesday showed that investment lending for homes decreased to 2.6% in April from 7.1% in March.

On the bright side, though, National Australia Bank's business confidence index for May rose to 7 from 3 in April, marking its highest reading since October.