Asia report: Markets fall as China inflation misses annual target

Additionally, China's continued consumer disinflation added to investor unease.

“China's economic landscape is becoming increasingly worrisome as consumer prices further decline, amplifying deflation fears,” said Stephen Innes, managing partner at SPI Asset Management.

“This troubling scenario starkly contrasts with other major economies grappling with persistent inflation issues, underscored by recent comments from US Federal Reserve officials and escalating price growth across the eurozone.

“China's ongoing battle with deflation could significantly dampen household spending and corporate profits, potentially crippling economic momentum.”

Innes said that, despite the gravity of the economic woes, the currency market remained relatively unaffected, cushioned by the People's Bank of China's “heavy-handed” interventions.

“The disappointing economic data hardly shocked market observers, as it reinforces the narrative of a stagnating Chinese economy, if not regressing.”

Most markets weaker amid fresh inflation concerns in China, US

In Japan, the Nikkei 225 fell 0.94% to close at 39,605.09, while the broader Topix index dropped 1.23% to 2,735.92.

Shipping stocks led losses, with Kawasaki Kisen Kaisha tumbling 5.8%, followed by Lasertec and Nippon Yusen, which declined 5.23% and 5.15%, respectively.

Chinese markets saw mixed performance.

The Shanghai Composite slipped 0.58% to 3,211.39, with steep losses from Zhejiang Aokang Shoes, Shandong Lukang Pharmaceutical, and Junhe Pumps, all dropping around 10%.

However, the Shenzhen Component edged up 0.32% to 9,976.00, offering a modest contrast to the broader downtrend.

In Hong Kong, the Hang Seng Index dipped 0.2% to 19,240.89, weighed down by declines in Li Ning, Li Auto, and Zhongsheng Group, which fell between 3.44% and 5.01%.

South Korea's Kospi 100 bucked the trend, gaining 0.12% to 2,533.06, bolstered by strong performances from SKC, S-Oil Corporation, and LS Industrial Systems, which rose 19.35%, 6.42%, and 6.06%, respectively.

Australia's S&P/ASX 200 declined 0.24% to 8,329.20, dragged down by sharp losses in Westgold Resources, which plunged 13.65%.

Lovisa Holdings and GQG Partners also posted significant declines, falling 10.51% and 6.28%.

New Zealand's S&P/NZX 50 shed 0.76% to 12,943.74, with Ryman Healthcare and Synlait Milk both down almost 5%, while ANZ Group Holdings fell 2.41%.

In currency markets, the dollar was last down 0.21% on the yen to trade at JPY 158.01, while it rose 0.29% against the AUSSIE to AUD 1.6135, and climbed 0.29% on the Kiwi, changing hands at NZD 1.7882.

Oil prices edged higher, with Brent crude futures last up 0.17% on ICE at $76.29 per barrel, and the NYMEX quote for West Texas Intermediate gaining 0.1% to $73.39.

Chinese inflation misses full-year targets, Australia trade surplus blasts past forecasts

In economic news, China's inflationary pressures eased further in December, signalling persistent weakness in consumer demand despite government efforts to stimulate the economy.

Consumer prices rose just 0.1% year-on-year, slowing from November’s 0.2% and marking the weakest pace since April, according to the National Bureau of Statistics.

On a monthly basis, inflation was flat, recovering from November’s 0.6% decline.

Core inflation, excluding food and energy prices, edged up to 0.4% from 0.3%, its highest in five months.

For the full year, consumer inflation stood at 0.2%, unchanged from 2023 and far below the official target of around 3%, marking the 13th consecutive year of missed targets.

Meanwhile, producer prices fell 2.3% year-on-year in December, narrowing slightly from November’s 2.5% drop, extending a record 27-month streak of factory-gate deflation.

Weak consumer spending, driven by job insecurity, a prolonged housing slump, and tariff threats from the incoming US administration, had forced businesses to broaden discounting, from electric vehicles to retail goods.

In Australia, trade figures exceeded expectations in November, fuelled by a rebound in commodity exports to China.

The trade surplus rose to AUD 7.08bn, surpassing forecasts of AUD 5.75bn and up from AUD 5.67bn in October, data from the Australian Bureau of Statistics showed.

Exports jumped 4.8% month-on-month, led by strong shipments of metal ores and minerals as Chinese stimulus measures drove demand.

Mineral fuel exports also climbed, supported by increased heating demand during cold weather in Asia and Europe.

Imports rose 1.7% during the month, driven by higher business spending on fixed assets and infrastructure, though consumer goods imports saw a slight decline.

In the United States overnight, Federal Reserve minutes from December revealed growing concerns about rising inflation risks under the incoming Trump administration.

Officials noted that fiscal and trade policies could create upward pressure on prices, with “almost all participants” identifying increased upside risks to the inflation outlook.

The Fed also indicated it may soon slow the pace of monetary policy easing, reflecting heightened vigilance over inflationary trends.

Reporting by Josh White for Sharecast.com.