Asian markets down on Fed rate increase fears and weak Chinese data

Most Asian markets were trading lower on 10 November (Tuesday) amidst fears of a rate increase by the US Federal Reserve at its December policy meeting. New weak and below expectations data from China added to the negative sentiments.

The possibility of a rate increase emerged after positive US jobs data. Higher interest rates mean higher costs of borrowing for companies world-wide. Rate increase could also strengthen the US dollar which would make it more expensive for firms from emerging markets to pay back dollar-denominated loans that they have piled up in recent years.

China's National Bureau of Statistics (NBS) reported that the consumer price index (CPI) in the world's second largest economy rose 1.3% for October. This was lower compared to September's 1.6% and lower than the expected rate of 1.5%. Also, China's producer price index (PPI) fell 5.9% in October, marking its 44<sup>th straight month of decline.

IG's market strategist Angus Nicholson opined that it was a concern to see a drop in consumer goods and food inflation as much of the hope for China's economic transition depended on continuing strong consumption and growth in its services sector.

Alicia Garcia Herrero, Natixis's chief economist for Asia Pacific, said: "This is not good news for a government that targets a floor to growth of 6.5% and doubling income by 2020. The People's Bank of China (PBOC), thus, will be under pressure to ease monetary conditions further."

While Japan's Nikkei 225 was up 0.15% at 19,671.26, thanks to a sharply weaker yen against the dollar, the markets across other Asian regions were trading lower. The Shanghai Composite index closed at 3,640.49, down 0.18%. Australia's S&P/ASX 200 was down 0.40% at 5,099.20 at closing and South Korea's KOSPI declined 1.44% at 1,996.59. Hong Kong's Hang Seng dipped 1.43% to close at 22,401.70. India's BSE was trading 0.64% lower at 25,954.24.

In commodities, oil has been negatively impacted in recent times by declining demand in China and Russia's record production leading to an overall dip in prices. WTI Crude oil declined 0.96% to $43.87 a barrel while Brent was down 0.49% at $47.19 a barrel.