Asian shares mostly fall as China inflation slows

HONG KONG—Asian markets mostly fell on Thursday as earlier optimism following another slowdown in Chinese inflation petered out and concerns over Europe’s debt crisis returned to the fore.

An upbeat assessment of the world’s biggest economy by the US Federal Reserve was also unable to provide enough support as Wall Street gave a weak lead one day after hitting a five-month high.

Sydney closed 0.16 percent, or 6.5 points, lower at 4,181.0, Tokyo fell 0.74 percent, or 62.29 points, to 8,385.59, while Seoul finished 1.03 percent higher, or 19.02 points, at 1,864.57.

Hong Kong finished 0.30 percent, or 56.56 points, lower at 19,095.38 while Shanghai closed flat, nudging 1.04 points down to 2,275.01.

China released figures showing consumer prices rose 4.1 percent in December, a fifth straight month of easing and their slowest pace since September 2010.

The National Bureau of Statistics said the full-year rate came in at 5.4 percent – well above the government’s four percent target.

The figures provided authorities with enough room to further ease monetary policy, lifting hopes for better credit conditions in the country after more than a year of measures aimed at tackling soaring inflation.

“China’s inflation numbers are mostly in line with expectations and show that inflation pressure continues to ease. Investors will continue to hope for moderate monetary loosening,” said Daniel So, strategist at SHK Financial.

However, analysts pointed out that the figures were in line with expectations and had already been factored in, leading the initial market gains to evaporate as dealers cashed in their profits.

Europe’s debt troubles again became a key focus.

Germany said its economy grew 3.0 percent last year but it was thrown into reverse in the final months by the eurozone turmoil, with an expected contraction of 0.25 percent in the fourth quarter.

Meanwhile, Spain said it suffered a seven percent year-on-year drop in industrial output for November, while Britain said its trade deficit had widened more than expected.

“Going into US reporting season, and ahead of our own reporting season, it’s hard to find any catalysts or investors willing to stick their neck out, especially with Europe’s sovereign debt crisis not going away.

“US economic data continue to show incremental improvement, but we’re going to need to see Europe change tack before investors really back equities,” Justin Gallagher, head of domestic sales trading and execution at RBS in Sydney, told Dow Jones Newswires.

However, debt-strapped Italy and Spain offered some cheer, holding bond auctions Thursday that saw their borrowing costs tumble, a development likely to help European markets and Wall Street.

Italy raised raised 12 billion euros ($15 billion) in its first bond auction of the year from short-term bills and a 12-month issue that saw borrowing rates drop to 2.735 percent from 5.952 percent in a similar auction last year.

Spain, meanwhile, raised 10 billion euros – twice the original target – with rates at less than four percent, as investors looked to a European Central Bank interest rate-setting meeting later in the day.

On Wednesday in Washington the US Fed’s Beige Book on economic conditions showed growth continued at a “modest to moderate pace”, while improvement continued, particularly with a pickup in consumer spending, a main driver of the economy.

Wall Street was mixed, with the Dow ending 0.10 percent lower after hitting its highest level since July in the previous session. The tech-rich Nasdaq rose 0.31 percent and the S&P 500 was flat.

European stocks firmed in opening deals on Thursday with London’s benchmark FTSE 100 index rising 0.05 percent, Frankfurt’s DAX 30 adding 0.13 percent and in Paris the CAC 40 gained 0.14 percent.

The euro – which late Wednesday fell to $1.2662, a new 16-month low – bought $1.2766 in early European trade.

It also sat at 98.14 yen, compared with 97.70 yen, while the dollar was at 76.87 yen compared with 76.83 yen.

On the oil markets, New York’s main contract, West Texas Intermediate crude for delivery in February added 65 cents to $102.21 per barrel, while Brent North Sea crude for February delivery rose 42 cents to $113.39.

Gold was at $1,652.72 an ounce at 1110 GMT, against $1,640.00 late Wednesday.

In other markets:

— Taipei was flat, edging down 1.63 points to 7,186.58.

Taiwan Semiconductor Manufacturing Co. was 0.65 percent higher at Tw$77.0 while smartphone maker HTC added 0.76 percent to Tw$463.5.

— Kuala Lumpur closed up 0.21 percent, or 3.27 points, at 1,525.56.

Genting Malaysia lost 1.3 percent to 3.85 ringgit, Kuala Lumpur Kepong shed 0.7 percent to 24.52 ringgit and MMC Corp. eased 0.4 percent to 2.73 ringgit.

— Singapore was down 0.13 percent, or 3.47 points, at 2,743.66.

Food and beverage firm Fraser and Neave gained 0.31 percent to Sg$6.50 and Singapore Airlines was down 1.23 percent to Sg$10.42.

— Bangkok edged up 0.06 percent, or 0.60 points, to 1,052.23.

Banpu added 0.34 percent to 588 baht, while Siam Cement fell 1.22 percent to 324 baht.

— Indian shares slid 0.86 percent, or 138.35 points, to 16,037.51.

Software giant Infosys fell 8.4 percent to 2,588.6 as it lowered its revenue forecast for the year, while rival Tata Consultancy Services also fell 3.89 percent to 1,092.9 rupees.

— Manila finished flat, edging 2.25 points higher to 4,648.11.

— Indonesia ended flat, edging down 0.14 points at 3,909.5.

Bank Mandiri was down 0.7 percent to Rp 6,700, while cigarette maker Gudang Garam fell 2.2 percent to Rp 59,150.

— Wellington slipped 0.52 percent, or 16.70 points, to 3,219.83.

Fletcher Building was down 0.9 percent at NZ$5.81, Air New Zealand fell 0.56 percent to NZ$0.88 and Contact Energy gained 0.41 percent to NZ$5.14.