Asian markets mixed as record US inflation fans taper talk

Asian investors tracked a sell-off on Wall Street in reaction to record US inflation and fresh China-US trade concerns. ©AFP

Hong Kong (AFP) - Asian markets were mixed Monday following another retreat on Wall Street as record high US inflation ramped up concerns the Federal Reserve will have to tighten monetary policy sooner than later.

Reports that President Joe Biden was considering a fresh trade probe into China added to the downbeat mood and nullified the optimism sparked by news that he had held talks on Friday with Xi Jinping in a bid to smooth relations between the superpowers.

After driving a healthy run-up in Asia so far this month, investor sentiment was once again roiled by data on Friday showing US factory gate inflation had soared in August to an all-time high of 8.3 percent owing to a jump in demand as well as supply and labour shortages.

The data ramped up speculation about the Fed's plans for monetary policy.

Its boss Jerome Powell has already indicated that the central bank will likely start tapering its vast bond-buying programme -- which has been a key driver of the economic and equity markets recovery -- by the end of the year.

But the latest figures could cause officials to bring forward their timeline.The release Tuesday of consumer inflation has now taken on more significance.

"With the US Federal Reserve due to meet next week, and the narrative clearly moving towards a tapering of asset purchases sooner rather than later, there appears to be a build up in anxiety that the continued rise in inflationary pressure may well be much more persistent than central bankers would have us believe," said CMC Markets analyst Michael Hewson.

All three US indexes ended in the red on Friday, with reports of Biden's probe adding to the selling pressure.

The president was said to be looking at Beijing's subsidies and their effect on the US economy, the reports said, with discussions also being held on last year's trade deal agreed by Donald Trump.

"While initially markets traded positively on the hopes that a restart in high-level dialogue might eventually lead to a reduction in Chinese tariffs," news about the investigation "delivered the opposite outcome", said National Australia Bank's Rodrigo Catril.

"That said, it is unclear when the White House will announce the outcome of its review and as we know from the Trump era, any action against China is likely to come with retaliations."

Hong Kong led the losers, with tech firms again taking much of the heat on lingering concerns about China's crackdown on the sector.Market heavyweight Alibaba plunged more than five percent after Chinese regulators ordered sweeping changes to the country's biggest payment app Alipay.

Alipay -- with more than a billion users in China and other Asian nations -- was told to spinoff its profitable micro loan business, the Financial Times reported Monday.

"The government believes big tech's monopoly power comes from their control of data," the source close to financial regulators told the newspaper. "It wants to end that."

The firm's parent company Ant Group is China's biggest payments services provider and part of the Alibaba empire.

Singapore, Taipei, Manila, Mumbai, Bangkok and Jakarta were also down but Tokyo, Shanghai, Sydney, Seoul and Wellington edged higher. 

London, Paris and Frankfurt rose after opening.

"Risk assets will continue to struggle in the near term with weak hard data due to the Delta (coronavirus) outbreak and supply disruptions over the summer," Barclays strategists including Shinichiro Kadota said.

Traders are also keeping tabs on the Korean peninsula after the North test-fired a new "long-range cruise missile" over the weekend, calling it a "strategic weapon of great significance".

The US military described the move as posting "threats" to the country's neighbours and beyond.

Key figures around 0720 GMT

Tokyo - Nikkei 225: UP 0.2 percent at 30,447.37 (close)

Hong Kong - Hang Seng Index: DOWN 2.1 percent at 25,657.20

Shanghai - Composite: UP 0.3 percent at 3,715.37 (close)

London - FTSE 100: UP 0.4 percent at 7,057.20

Dollar/yen: UP at 110.11 yen from 109.93 yen at 2100 GMT Friday

Pound/dollar: DOWN at $1.3811 from $1.3839

Euro/dollar: DOWN at $1.1784 from $1.1814

Euro/pound: DOWN at 85.32 pence from 85.34 pence

West Texas Intermediate: UP 1.0 percent at $70.39 per barrel

Brent North Sea crude: UP 0.9 percent at $73.58 per barrel

New York - Dow: DOWN 0.8 percent to 34,607.72 (close)

- Bloomberg News contributed to this story -

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