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Asian Shares Lower as Surge in Chinese Consumer Inflation Rattles Investors

China’s consumer inflation climbed to nearly eight-year peaks in November as pork prices doubled, but factory-gate prices remained in the red, adding to uncertainty over whether the manufacturing sector is bottoming out as trade risks persist.
James Hyerczyk
Asian Shares

Asia Pacific shares are trading mostly lower on Tuesday as a surge in Chinese consumer inflation in November rattled traders and as several key upcoming risk events encouraged investors to take some money off the table after recent gains. Shares in Australia are getting hit the hardest, while the Korean market is bucking the trend with a modest gain.

At 05:58 GMT, Japan’s Nikkei 225 Index is trading 23415.80, down 14.90 or -0.06%. Hong Kong’s Hang Seng Index is at 26483.93, down 10.80 or -0.04% and South Korea’s KOSPI Index is trading 2094.71, up 6.06 or +0.29%.

China’s Shanghai Index is at 2911.65, down 2.82 or -0.10% and Australia’s S&P/ASX 200 Index is trading 6706.90, down 23.10 or -0.34%.

US-China Trade Update

Bloomberg reported Tuesday that U.S. Agriculture Secretary Sonny Perdue said Washington is unlikely to impose upcoming tariffs on Chinese exports, set to go into effect on December 15.

“We have a deadline coming up on December 15 for another tranche of tariffs, I do not believe those will be implemented and I think we may see some backing away,” Perdue said, according to Bloomberg.

“I don’t think the president wants to implement these new tariffs but there’s got to be some movement on their part to encourage him not to do that and hopefully the signal that they sent over soy and pork reduction might be that signal in that way,” Perdue said.

Perdue is referring to Friday’s announcement from China’s Finance Ministry that it’s in the process of waiving retaliatory tariffs on imports of U.S. pork and soy by domestic companies.

Negotiators Dealing with Enforceability Issues

Perdue also said, “The challenge is, we are used to dealing in contracts here, we are used to fulfilling contracts, one party contracts with another and we fulfill that, we have arbitration when that doesn’t happen,” he said. “Between nations there’s not a lot of arbitration and that’s the challenge. If China signs a deal and a contract, what are the enforceability measures of that? That’s really what we are dealing with right now.”

China’s CPI Hits Eight-Year High, PPI Remains Weak

China’s consumer inflation climbed to nearly eight-year peaks in November as pork prices doubled, but factory-gate prices remained in the red, adding to uncertainty over whether the manufacturing sector is bottoming out as trade risks persist.

Consumer prices in November rose 4.5% on year, the fastest pace seen since January 2012, driven mostly by a surge in pork prices as African Swine Fever ravaged the country’s hog herds, National Bureau of Statistics (NBS) data showed on Tuesday. That topped analysts’ expectations of 4.2% and October’s 3.8% rise.

In contrast, the producer price index (PPI), seen as a key indicator of corporate profitability, fell 1.4% on year, falling for the fifth month in a row. That compared with a 1.5% drop forecast in a Reuters poll and 1.6% fall in October.

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