Chinese stocks fell on Wednesday as China’s consumer prices slipped into negative territory in July for the first time in 28 months. The drop in inflation adds to concerns about China’s economic outlook.
The CSI 300 index, which tracks the largest companies listed in Shanghai and Shenzhen, fell 0.31%. Mainland Chinese markets closed lower, with the Shanghai Composite ending down 0.49% at 3,244.49 and extending its losing streak to three days.
The Shenzhen Component lost 0.53% to close at 11,039.45. In Hong Kong, the Hang Seng Index hovered above the flatline in its final hour of trade, ending up 0.32% at 19,246.03.
Deflation Hits China
China’s July consumer price index (CPI) declined 0.3% year-on-year, smaller than the 0.4% drop expected by economists polled by Reuters. It was the first time China’s inflation rate fell since February 2021.
The producer price index (PPI) fell 4.4% in July compared to a year ago, more than the 4.1% decline predicted.
“These numbers will deepen worries about both China’s growth prospects and the effectiveness of traditional stimulus measures,” said Mohamed El-Erian, chief economic advisor at Allianz, in a tweet.
The offshore yuan strengthened slightly against the U.S. dollar after the news, trading at 7.2257.
Markets in Asia Mixed
Major markets in Asia-Pacific were mixed on Wednesday.
Japan’s Nikkei 225 slid 0.53% to close at 32,204.33, while the Topix fell 0.4% to end at 2,282.57.
Meanwhile, South Korea’s Kospi closed 1.2% higher at 2,605.12, snapping a five-day losing streak. The Kosdaq gained 1.86% to finish at 908.98.
Australia’s S&P/ASX 200 rose 0.37% to end at 7,338.
U.S. Stocks Fall on Bank Downgrades
Overnight on Wall Street, all three major indexes declined after Moody’s downgraded the credit ratings of several regional banks, citing deposit risk, recession fears and struggling commercial real estate portfolios.
The Dow Jones fell 0.45%, the S&P 500 dipped 0.42% and the Nasdaq pulled back 0.79%.
China Inflation Falls for First Time Since Early 2021
China’s CPI fell 0.3% in July versus a year earlier, the National Bureau of Statistics reported on Wednesday, dropping into negative territory for the first time since February 2021.
On a monthly basis, CPI rose 0.2% in July.
Falling consumer prices reflect weak domestic demand in China as repeated COVID-19 outbreaks and lockdowns disrupted business activity.
Producer prices declined 4.4% year-on-year in July, pointing to significant slack in China’s industrial sector.
Nikon Shares Plummet 17% on Profit Slump
Shares of Japanese camera maker Nikon plunged as much as 17% on Wednesday after the company posted a 78.3% year-on-year plunge in Q1 net profit to 2.58 billion yen ($18 million).
Nikon’s operating profit fell 78.6% to 3.29 billion yen, while revenue rose 8.6% to 158.15 billion yen. The company has struggled with declining demand for cameras due to the rise of smartphones.
Goldman Picks AI Stocks in Asia
Goldman Sachs has identified artificial intelligence as a key investing theme in Asia-Pacific. The bank screened for AI stocks in hardware, semiconductors and applications that could benefit from rising AI demand.
South Korea Unemployment Rises
South Korea’s unemployment rate climbed to 2.7% in July, up from 2.6% in June but down 0.2 percentage points versus a year earlier. The number of unemployed persons stood at 807,000 in July, a 3.5% annual drop.
Analysts Bullish on Oil & Gas Stocks
Outperforming analysts at RBC Capital Markets revealed two new top picks in oil and gas that could rise over 30%. RBC’s stock picks have surged 145% since inception compared to a 29.5% gain for a benchmark ETF.
Regional Bank Stocks Sink
Regional bank stocks fell on Tuesday, driven by a sell-off in the SPDR S&P Regional Banking ETF (KRE), which dropped 3.4% on the day.
Decliners included BankUnited, Bank of Hawaii, Fulton Financial, Citizens Financial and Zions Bancorporation, which fell over 4.5%.
Harker: Rate Hikes May Pause Soon
Philadelphia Fed President Patrick Harker said Tuesday the central bank may be at the point where it can stop hiking interest rates soon.
“Absent any alarming new data between now and mid-September, I believe we may be at the point where we can be patient and hold rates steady,” he said.
However, Harker noted rates are unlikely to be cut in the near future. The pandemic taught the Fed to “never say never,” but he does not foresee easing policy soon.
China’s consumer inflation fell into negative territory in July for the first time since early 2021, fueling economic concerns.
Chinese stocks dropped Wednesday, along with markets in Japan, while South Korea and Australia rose.
Regional bank stocks led Wall Street lower Tuesday after credit downgrades from Moody’s.
An Fed official hinted rate hikes could pause soon if economic data holds up.
Goldman Sachs highlighted AI stocks in Asia that could benefit from surging demand.
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