Asia: Stocks join global selloff on Fed concern before China CPI

[SYDNEY] Asian stocks joined a global selloff amid concern that US policy makers will next month end an unprecedented era of record-low borrowing costs, and as investors awaited a Chinese inflation report. Material and technology shares led declines.

The MSCI Asia Pacific Index dropped 0.4 per cent to 133.16 as of 9:00 am in Tokyo as Japan's Topix index slid from an 11-week high. The Standard & Poor's 500 Index retreated one per cent on Monday as investors confronted the increased likelihood the Federal Reserve will boost interest rates this year. For Asian asset managers, the prospect of tighter US policy is compounding concern about the growth outlook as China's expansion slows.

Producer prices in Asia's biggest economy fell for a 44th month in October and consumer inflation decelerated, according to economist estimates before a report Tuesday.

"In what is now a regular event, global markets sunk overnight and are pricing in the worst of the US and China," Michael McCarthy, chief market strategist in Sydney at CMC Markets, said in an e-mail to clients.

"According to this view, China continues to weaken toward implosion, but not far or fast enough to head off a lift in US rates." The Topix fell 0.8 per cent in Tokyo, while South Korea's Kospi index lost 0.5 per cent. New Zealand's S&P NZX 50 Index slid 0.7 per cent. Australia's S&P/ASX 200 Index dropped 1.2 per cent. Markets in China and Hong Kong have yet to start trading, while those in Singapore and Malaysia are closed for a holiday.

Futures on the FTSE China A50 Index of the nation's biggest companies dropped 0.8 per cent in most recent trading, while contracts on the Hang Seng China Enterprises Index of mainland shares listed in Hong Kong fell 0.9 per cent. The Shanghai Composite Index jumped 1.6 per cent on Monday to cap a four-day, 10 percent surge.

The OECD trimmed its global economic forecasts for the second time in three months as slower growth in emerging markets spilled over into countries such as Germany and Japan. World output will expand 2.9 per cent in 2015 and 3.3 per cent in 2016, down from the 3 percent and 3.6 per cent predicted in September, the Organization for Economic Cooperation and Development said in a semi-annual report published Monday.

China's consumer prices probably increased 1.5 per cent in October from a year earlier, while factory prices slid 5.9 per cent, according to the median estimates in Bloomberg surveys of economists. Export and import figures released at the weekend missed projections.

Futures on the S&P 500 were little changed on Tuesday. The measure's slump came after US investors shrugged off the threat of higher rates at the end of last week, focusing instead on a blowout jobs report that signaled the economy may be ready to withstand tighter monetary policy.

That sentiment was reversed on Monday in the absence of any additional data and after American equities ended last week near their highest level in three months. There's a 68 per cent chance the Fed will move on rates in December, futures trading show.

BLOOMBERG