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[HONG KONG] A mixed reading on Chinese inflation on Thursday kept Asian equities traders on edge in fresh volatility Thursday as markets retreated from a two-day rally, while fears of a US interest rate hike added to the unease.
Investors took their cash off the table despite Chinese Premier Li Keqiang seeking to shore up confidence in the government's handling of an economic crisis that has sent global markets plunging.
A late tumble on Wall Street provided extra reason to run after a report showing a tighter US jobs market increased speculation the Federal Reserve will pull the trigger on a rate rise at next week's policy meeting.
Thursday's losses follow thumping gains across the world over the previous two days - including a 7.7 per cent jump in Tokyo on Wednesday - which were helped by Chinese moves to bolster its economy.
However, Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors in Sydney, told Bloomberg News: "Markets will remain volatile until the Fed meeting next week.
"Investors are again focusing on the potential US interest rate increase and how it would impact emerging markets." In Beijing, official figures showed the consumer price index (CPI) rose two per cent last month, better than July's 1.6 percent and beating forecasts of 1.8 per cent.
However, the producer price index (PPI) - a crucial measure of costs for goods at the factory gate and a leading indicator of the trend for consumer prices - slumped at its fastest rate in six years.
The figures will do little to ease the struggle authorities have in kickstarting the world's number two economy and main driver of global growth as it suffers a painful slowdown.
"This is a real problem," said Zhu Qibing, a Beijing-based analyst at China Minzu Securities Co. "For a manufacturer, CPI represents its costs because wages rise, and PPI represents the prices of its product. Now profits of enterprises are being further eroded."
Later, China's Li warned that changing in the world's second-largest economy is fraught with difficulties and uncertainty as leaders try to change its model to one driven by domestic consumers rather than exports and government investment.
"This is going to be a painful and treacherous process," Mr Li said in a speech to a World Economic Forum meeting in the northeastern city of Dalian.
"So ups and downs in economic performance are hardly avoidable", he added, calling that "natural" during a time of change.
A day earlier he looked to provide a reassurance that Beijing was capable of maintaining high growth, trying to stem fears about the latest crisis in the global economy.
China has said it will adopt "stronger" fiscal policies to support growth while it is also tightening capital controls following a devaluation of its yuan currency as worries about fund outflows rise - made worse by talk of a US rate hike.
Mr Li defended Beijing's decision last month to devalue the yuan currency - which sparked a worldwide rout - saying it "will maintain a reasonable equilibrium level".
Despite his promises regional markets sank Thursday, with Shanghai losing 1.39 per cent, Hong Kong 2.50 per cent lower in the afternoon and Tokyo finishing 2.51 per cent off. Sydney, where several firms with close business ties to China are listed, ended 2.42 per cent lower.
In the United States the Labor Department's so-called JOLTS report on the jobs market showed vacancies rose in July to the highest level since the data was first reported in 2000.
The news revived talk of a September rise in borrowing rates, which would likely drag on investment opportunities.
The dollar rose to 120.80 yen Thursday, from 120.54 yen in New York, while the euro fetched US$1.1196 compared with US$1.1205 Wednesday.
Australia's dollar recovered from early losses to sit 0.25 per cent higher after a better-than-expected jump in new jobs helped push the country's unemployment rate down.
New Zealand's dollar sank 1.7 per cent after its central bank cut interest rates again and indicated further easing could follow in coming months.