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Sydney - Equity markets outside Japan declined after data showed Chinese producer prices rising at the fastest pace since just after the Beijing Olympics, while consumer prices were weaker than expected.
Treasury yields and the dollar continued to climb after a strong jobs report in the US.
The Hang Seng Index and Shanghai Composite Index both fell the most this month, while a gauge of Chinese stocks traded in Hong Kong had the steepest drop since mid-January.
The MSCI Asia Pacific Index was at its lowest in nearly a month, but Japanese equities were higher, supported by a weaker yen. The yuan was its weakest against the dollar in two months. Oil rose from a three-month low, and gold declined for a fourth day.
Analysts have lifted estimates for Friday’s non-farm payrolls on the back of an ADP reading that showed the US added the most workers in almost three years. A rate increase is priced into the market as a near-certainty. The bull market in US stocks has entered its eighth year on one of the steepest post-election rallies in history.
China’s producer price index reading shouldn’t concern policy makers as it is set to peak in a month or two and then drop as base effects reverse, according to Julian Evans-Pritchard, China economist at Capital Economics.
“The lack of a pick-up recently highlights how insensitive consumer prices are to producer price inflation,” he wrote in a note. “We expect any further tightening of policy this year to be driven by concerns about credit risks rather than efforts to contain inflation.”
What’s ahead for the markets:
Mario Draghi is expected to keep QE going until the end of the year with underlying price pressures muted. The ECB’s policy decision will be announced at 13:45 and Draghi will hold a press conference 45 minutes later.
Official US jobs data for February are due on Friday. Employers probably added around 200 000 workers to payrolls, in line with the average over the past six months and a sign of steady job growth, economists forecast.
Here are the main moves in markets:
Currencies
The offshore yuan was down 0.2% at 6.9296 per dollar as of 08:38. China’s producer price index climbed 7.8% in February, the highest reading since September 2008, and the consumer price index rose 0.8%, less than the 1.7% increase that was forecast.
The Bloomberg Dollar Spot Index rose 0.1% after gaining 0.4% on Wednesday. South Korea’s won slumped 1.1% to 1 156.13 per dollar. The Japanese yen was down 0.2% at ¥114.54/$. The British pound and the euro both fell 0.1%.
Stocks
The Hang Seng Index retreated 1.1%, its biggest intraday drop since February 1, while the Shanghai Composite Index fell 0.8%, the most since February 27. The Hang Seng China Enterprises Index slid 1.5%.
The Topix Index in Japan advanced 0.3%. The MSCI Asia Pacific index was down 0.4% at its lowest since February 14. Futures on the S&P 500 were little changed after the benchmark index lost 0.2% on Wednesday. The index is up 5.5% in 2017.
Bonds
Yields on 10-year US Treasuries were up one basis point at 2.57% after climbing 25 basis points over the past eight days. Australian yields for similar-dated government notes were up seven basis points at 2.93% after hitting 2.94%, the highest since December 2015.
Commodities
West Texas Intermediate crude rose 0.6% to $50.54 a barrel. It tumbled more than 5% the previous session to the lowest close since December 7. Gold was down 0.2% at $1 205.93 an ounce, slumping for a fourth day.
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