SYDNEY- Asian shares were on the defensive on Wednesday after China inflation data confirmed the recovery in the world’s second-biggest economy is losing steam, while resurfacing concerns about US bank stability also capped sentiment.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.1 percent after a 1.2 percent tumble a day earlier. Japan’s Nikkei slipped 0.1 percent .
The much-watched data on Wednesday showed China’s consumer prices fell 0.3 percent in July from a year ago, slightly better than expected but the first decline since February 2021. Producer prices dropped for a 10th consecutive month. The data followed disappointing trade figures a day earlier that fueled concerns about the global economic outlook.
China’s blue chips eased 0.2 percent while Hong Kong’s Hang Seng index fell 0.5 percent .
Chinese property developers listed in Hong Kong dropped 0.5 percent after a 4.8 percent plunge a day earlier, as worries about the sector, a major pillar of economic growth, persisted.
“China is once again facing renewed headwinds posed by the 3D challenge of debt, demographics and deflation,” said Chetan Ahya, chief Asia economist at Morgan Stanley.
“We think China is better-placed than Japan in the 1990s. It should be less challenging to prevent China from falling into a persistent debt-deflation loop.”
Carol Kong, a currency strategist at CBA, said fading base effects and government policy support suggested deflation was likely to be short-lived.
Overnight, Wall Street finished lower in a broad sell-off after the downgrading of several lenders by Moody’s reignited fears about the health of US banks and the economy. The Dow fell 0.5 percent , the S&P 500 lost 0.4 percent and the Nasdaq Composite dropped 0.8 percent.
The Italian government also shocked markets on Tuesday by setting a one-off 40 percent tax on profits made by banks from higher interest rates, sending regional banking shares down 3.5 percent.
It later said the new tax on banks would not amount to more than 0.1 percent of total assets, in a move that could lead to a rebound in European banking shares on Wednesday. – Reuters
