China PPI and property sector nerves send equities lower
An elevated PPI print from China this morning and China property sector nerves have seen Asian stock markets fall mostly into the red today after Wall Street finally saw a modest correction low after a multi-day rally. China’s PPI release reached a record high of 13.50% YoY for October, with officials blaming weather, material and energy costs. That overshadowed the Inflation data, released at the same time, which came in elevated, but on target at 1.50% YoY for October. The PPI should retreat into the end of the year, thanks to falling iron ore prices, now at one-year lows, and coal prices. Still, Asia is on inflation alert, fearing future costs of inputs from goods sourced from China.
Overnight, the S&P 500 fell by 0.35%, the Nasdaq lost 0.60% and the Dow Jones eased by 0.31% after multi-year highs in US PPI spurred profit-taking. In Asia, futures on all three indexes have lost another 0.40%, deepening the negative sentiment in regional markets.
The Nikkei 225 is 0.70% lower, while South Korea’s Kospi has dropped by 0.90%. China equity markets are being hit hard with the Shanghai Composite retreating 1.20% with the narrower Shanghai 50 now 1.80% lower. The CSI 300 has fallen by 0.75%, while the Hang Seng has retreated by 1.30%.
In regional markets, Singapore is 0.55% lower and Kuala Lumpur has fallen by 0.35%. Taipei is outperforming relatively, unchanged on the day. Jakarta is 0.20% lower with Bangkok and Manila down 0.45%. Australian markets are slightly lower as well, the ASX 200 falling 0.33% and the All Ordinaries easing by 0.20%.
The broad weakness that has flowed from Wall Street into Asia today is likely to lead to a lower opening for European stocks. It seems that investors are keen to lower exposure into the US CPI data tonight. If that passes without incident, though, it would not surprise me in the least to see the equity rally resume.
