Nikkei leads losses in Asia as China Inflation Disappoints

Regional markets mostly lower as investors await China and US CPI data

Tokyo: Asian stocks fell on Wednesday, dragged down by losses in Japan, as investors awaited key inflation data from China and the United States for clues about the trajectory of interest rates.

Nikkei Down over 1% as Chipmakers Weigh

Japan's Nikkei share average led the declines, losing over 1% as semiconductor-related shares weighed. Chipmaker Tokyo Electron was down by 0.9%, while Advantest Corp fell 1.3%. Technology stocks benefited from the increase in work-from-home related purchases and tapped into the growth potential associated with the “internet-of-things,” skyrocketing because of the pandemic. Now that Covid restrictions are easing, investors are unsure if the growth path for many tech stocks will continue and instead are looking to reallocate funds.

China Stocks Dip as Inflation Data Disappoints

Chinese blue chips slid 0.2% despite data showing that China's consumer inflation came in weaker than expected in July. The consumer price index (CPI) rose 2.7% year-on-year, below expectations of a 2.9% increase and the previous reading of 2.9%. While inflation remains below the central bank's target of 3%, a pick up in producer prices to a 26-month high is expected to feed into consumer prices in coming months.

Markets will be closely watching the release of China's producer price index (PPI) later in the day for further insight into inflation trends. A stronger-than-expected PPI reading could add pressure on the central bank to tighten monetary conditions further.

Investors Awaiting US Inflation Data

Investors are also awaiting the release of US CPI data later in the day. Expectations are for a slight increase in inflation to 8.8% y/y, up from 8.6% in May. A higher-than-expected reading could raise concerns about persistent inflation and increase pressure on the Federal Reserve to raise interest rates more aggressively.

Other Markets Quiet

Elsewhere in Asia, most major markets traded in a narrow range as investors were cautious ahead of the key inflation data. Hong Kong's Hang Seng index was down 0.05%, while the Shanghai Composite index was little changed. South Korea's KOSPI index rose 0.2%, while Australia's S&P/ASX 200 index was up 0.1%.

Crude Oil Prices Ease

In energy markets, crude oil prices eased as investors worried about a potential global recession. Brent crude futures fell 0.5% to $106.34 a barrel, while US West Texas Intermediate (WTI) crude futures declined by 0.6% to $103.02 a barrel.