Hong Kong's Hang Seng drops 2% as Asia markets slip; China's inflation rises

SINGAPORE — Asia-Pacific shares fell on Wednesday as investors digest inflation data from China and look ahead to the U.S. CPI report.

Hong Kong’s Hang Seng index fell 1.96% to close at 19,610.84, with the Hang Seng Tech index down 2.83%. Heavyweights Meituan and fell 3.64% and 4.46% respectively.

Heath care, consumer and real estate stocks also dragged the Hang Seng lower, according to Eikon data.

Property developer Longfor plunged 16.4% after the company reported that contracted sales for the first seven months of the year dove nearly 58% compared with the same period a year ago.

Mainland China markets slipped, with the Shanghai Composite 0.54% lower at 3,230.02, and the Shenzhen Component down 0.87% at 12,223.51.

China’s producer price index for July rose 4.2% from a year ago, lower than the 4.8% increase predicted in a Reuters poll.

Consumer prices increased 2.7% in July compared with the same period in 2021, the most since July 2020. Analysts expected the print to stand at 2.9%.

“Underlying inflation pressures remain limited in China because sporadic lockdowns have weighed on consumer spending and overall economic activity,” Carol Kong, a senior associate, international economics and currency strategy at Commonwealth Bank, wrote in a Wednesday note ahead of the data release.

“China’s relatively subdued inflation impulse stands in contrast with the persistently strong U.S. inflation,” the note said.

Later Wednesday, the U.S. will be reporting inflation data as well. Economists predict that consumer inflation will come in at 8.7%, compared with 9.1% in June, according to Dow Jones.

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Asia-Pacific markets dip

The Nikkei 225 in Japan fell 0.65% to close at 27,819.33, while the Topix index slipped 0.17% to 1,933.65.

In South Korea, the Kospi dipped 0.9% to close at 2,480.88 and the Kosdaq dropped 1.6% to 820.27.

Australia’s S&P/ASX 200 lost 0.53% to 6,992.7.

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MSCI’s broadest index of Asia-Pacific shares outside of Japan shed 1.24%.

In company news, Toyota Motor announced that it would suspend some production operations due to positive Covid cases at work sites.

Cathay Pacific and Honda Motor are among the companies reporting earnings on Wednesday.

Shares of Hong Kong’s Cathay Pacific rose around 1% after the carrier reported a narrower loss for the first half of 2022 compared to the same period in 2021. Revenue rose 17% to 18.6 billion Hong Kong dollars ($2.36 billion).

Overnight stateside, the Nasdaq Composite fell more than 1% to 12,493.93. The Dow Jones Industrial Average lost 58.13 points or 0.18% to 32,774.41, while the S&P 500 dipped 0.42% to 4,122.47.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 106.329, holding below the 106.5 level.

A strong inflation print is likely to reinforce the idea that the Fed is not close to pausing its tightening cycle and markets would readjust their expectations for U.S. interest rates, Commonwealth Bank’s Kong added.

“A resurgence in FOMC rate expectations can help the USD recover, especially against the JPY, which is sensitive to changes in U.S. Treasuries.”

The Japanese yen traded at 135.01 per dollar, staying weaker since the strong U.S. payrolls report. The Australian dollar was at $0.6970.

U.S. crude futures were down 0.74% at $89.83 per barrel, while Brent crude futures dipped 0.53% to $95.80 per barrel.