Asian Stocks Decline Second Day Amid China Deflation Concerns

Asian stocks dropped for a second day, tracking a decline in U.S. equities, as moderating inflation and slumping factory-gate prices in China bolstered concern about the slowdown in the world’s second-largest economy.

Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, lost 1.6 percent in Hong Kong. Great Wall Motor Co. slipped 3 percent after the maker of sport-utility vehicles cut the price of its share placement. Nikon Corp. dropped 5.3 percent in Tokyo after a report the camera maker will post a 27 percent drop in operating profit in the six months ended September.

The MSCI Asia Pacific Index fell 1.1 percent to 131.36 as of 4:01 p.m. in Hong Kong. Global equities snapped their longest rally since February on Tuesday and the Standard & Poor’s 500 Index fell from a seven-week high amid a plunge in Chinese imports. Investors will be watching Wednesday’s consumer and producer prices data to gauge how weakness in China’s economy will impact the global economic outlook.

“The cautionary element in the market is likely to continue,” Chris Green, an Auckland-based strategist at First NZ Capital Ltd., said by phone. “In terms of global growth, the risk is skewed towards the downside. A softer read on the Chinese inflation data reinforces the backdrop of deflationary pressures and a softer growth profile globally. The Chinese economy is probably the largest risk that the global economy faces.”

China Slowdown

The Shanghai Composite Index fell 0.9 percent as data on inflation and factory-gate prices signaled more weakness in the Chinese economy. The consumer-price index increased 1.6 percent in September from a year earlier, slowing from a 2 percent rise in August and compared with a 1.8 percent median estimate in a Bloomberg survey. The producer-price index fell 5.9 percent, extending its streak of negative readings to 43 months, the National Bureau of Statistics said Wednesday.

Singapore’s Straits Times Index dropped 0.5 percent, erasing earlier gains of as much as 0.6 percent. The nation’s central bank eased monetary policy for the second time this year as the economy narrowly avoided a technical recession, saying weakening prospects for global growth will pose "headwinds" in the coming months.

Hong Kong’s Hang Seng Index lost 0.7 percent. Japan’s Topix index declined 2.2 percent. South Korea’s Kospi index and Taiwan’s Taiex index both fell 0.5 percent. Australia’s S&P/ASX 200 Index slid 0.1 percent, while New Zealand’s S&P/NZX 50 Index added 0.4 percent. Markets in Malaysia and Indonesia are closed for holidays.

E-mini futures on the S&P 500 added 0.1 percent. The underlying gauge declined 0.7 percent on Tuesday as industrial shares sank and selling picked up in biotechnology stocks.

Traders are now pricing in a 36 percent chance of a Federal Reserve interest-rate increase by December.

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