Asian shares rise on China data

HONG KONG – Asian shares mostly fell Friday as China’s August inflation rate remained on the high side, while President Barack Obama’s plan to boost jobs in the world’s biggest economy failed to inspire markets.

Sentiment was also weighed by news that eurozone growth forecasts were slashed due to concerns over the ongoing debt crisis, while Japan’s economy shrank more than first thought in the April-June quarter.

Tokyo closed 0.63 percent, or 55.46 points, lower at 8,737.66, Seoul was 1.83 percent, or 33.71 points, off at 1,812.93 and in the afternoon Hong Kong shed 0.36 percent while Shanghai was 0.25 percent lower.

But Sydney gained 0.16 percent, or or 7.7 points, to 4,194.7 and Taipei added 0.82 percent, or 62.20 points, to 7,610.57.

China said consumer prices rose 6.2 percent year on year in August, down from July’s three-year high of 6.5 percent.

The figures provided some respite over inflation – which the government has been struggling to tame – but analysts warned it was still likely to stay high for some time.

Investors fear that if prices remain too high the government will announce more monetary tightening measures to go with the five interest rate hikes since October and numerous increases in the amount banks must keep in reserve.

The figure provided some lift to markets that rely on China to help drive their economies, including Australia and Taiwan.

However, despite the rise, analysts said price rises were still on the high side.

“We are assured it is a peak for this year but any falling back would be very slow,” said Yao Wei, a Hong Kong-based economist with Societe Generale

“CPI is likely to stay above five percent for a long period of time, which is not good news for the central bank.”

And Brian Jackson, senior emerging markets strategist at the Royal Bank of Canada, told Agence France-Presse: “Overall, we expect price pressures to ease over the next three to six months.

“But today’s is only one month’s data. Inflation could bounce back. There’s a chance they might tighten policy further if inflation doesn’t slow as fast as they’d like.”

US President Barack Obama was unable to stir any excitement in Asia with his proposal to kickstart jobs growth.

Obama proposed a $447 billion plan to revive the US economy, which includes cutting payroll taxes for employees and businesses, spending billions fixing roads and bridges and extending and revamping unemployment benefits.

Robert Ryan, a foreign exchange strategist at BNP Paribas in Singapore, said the new net tax cuts would total less than $100 billion, less than one percent of gross domestic product, even if Congress agrees to the plan.

“The market focus remains squarely on two issues at the moment – namely the sovereign debt situation in Europe and renewed fears of the US economy entering a recession,” Westpac analysts said in a note to clients.

“This has pushed measures of market risk aversion to elevated levels,” the note said, according to Dow Jones Newswires.

Japan said its economy shrank at an annualised pace of 2.1 percent in April-June, revising August’s reading of a 1.3 percent contraction as firms deferred spending plans after the March 11 earthquake and tsunami.

It follows other data that have raised concerns about Japan’s recovery as it struggles to deal with a slowing global economy and a strong yen.

The Organisation for Economic Cooperation and Development (OECD) and European Central Bank slashed their eurozone growth forecasts.

The OECD said it expected the eurozone to grow 1.4 percent in the third quarter of 2011 and shrink 0.4 percent in the final three months.

It said Germany, the main driving force in the region, could grow 2.6 percent in the third quarter but was set to contract 1.4 percent in the fourth.

France is now expected to grow 0.9 percent in the third quarter and just 0.4 percent in the fourth.

ECB President Jean-Claude Trichet said the bank now expects the eurozone to post 1.6 percent growth in 2011 and 1.3 percent in 2012, compared with previous forecasts of 1.7 percent and 1.9 percent respectively.

The euro bounced back on bargain buying after suffering selling pressure in New York as the European Central Bank signalled it would stop hiking interest rates, citing increased risks to the eurozone economy.

The euro gained to $1.3912 in Tokyo trade from $1.3880 in New York late Thursday. The European common unit also firmed to 107.77 yen from 107.57 yen. The dollar was flat at 77.48 yen against 77.52 yen.

Eyes will now turn to a meeting in Marseille of finance ministers and central bankers from the G7 major industrialised economies that starts Friday aiming to revive global growth and ease the European debt crisis.

A drop in US crude stocks sent oil prices higher. New York’s main contract, West Texas Intermediate for delivery in October, gained four cents to $89.09 per barrel. Brent North Sea crude for October rose 27 cents to $114.82 in the afternoon.

Gold was trading at $1,871.65 an ounce at 0630 GMT, up from $1,835.70 on Thursday.

In other markets:

— Manila closed 0.24 percent, or 10.66 points, lower at 4,346.07.

SM Investments fell 1.2 percent to 553 pesos, Lepanto Mining was up 1.4 percent at 1.42 pesos, and Philippine Long Distance Telephone shed 1.2 percent to 2,384 pesos.

— Wellington finished 0.48 percent, or 15.88 points, higher at 3,323.93.

Telecom ended 1.6 percent higher at NZ$2.52 and Fletcher Building rose 1.9 percent to NZ$7.88.