China’s inflation data for April is higher than expected

SINGAPORE – Stocks in Asia-Pacific were mixed on Wednesday as investors watched the market’s reaction to the release of higher-than-expected Chinese inflation data for April.

Mainland Chinese stocks led gains regionally, with the Shanghai Composite up 0.75% to close at 3,058.70 while the Shenzhen Component rose 1.803% to 11,109.48. Hong Kong’s Hang Seng Index rose 0.97% on the day to 19,824.57.

Investor confidence in Chinese stocks may have been boosted by positive developments in the Covid situation on the mainland.

The Shanghai government announced Wednesday that eight districts have “contained the virus at the community level.” Meanwhile, the capital city of Beijing also saw about half the number of new daily cases as in previous days.

In inflation data released on Wednesday, China’s producer price index for April rose 8% year-on-year, above analysts’ expectations for a 7.7% increase in a Reuters poll.

China is going to be struggling with a lot of economic issues, including supply chain and inflation factors, but I’m a little less concerned about supply chain than I was six months ago.

Andrew Collier

Managing Director, Orient Capital Research

Consumer inflation also increased more than expected. The consumer price index rose 2.1% year-on-year, above analysts’ expectations for a 1.8% rise in a Reuters poll.

“China is going to be struggling with a lot of economic issues, including supply chain and inflation factors, but I’m a little less concerned about supply chain than I was six months ago,” said Andrew Collier, managing director of Orient Capital Research. CNBC’s “Street Signs Asia” on Wednesday.

“Even in Shanghai, 70% of [the] manufacturing capacity is online. The recent survey by the American Chamber of Commerce indicated that only 15% of their companies are not producing, although the majority of them, two-thirds, have slowdowns,” Collier said.

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In other broader markets, Japan’s Nikkei 225 gained 0.18% to close at 26,213.64, while the Topix index lost 0.6% to 1,851.15.

South Korea’s Kospi fell 0.17%, ending the trading day at 2,592.27, while Australia’s S&P/ASX 200 closed 0.19% higher at 7,064.70.

MSCI’s broader index of Asia-Pacific stocks outside of Japan rose 0.4%.

The US Consumer Price Index for April is also due out on Wednesday in the US and is expected to be slightly down from March’s 8.5%, which could indicate that inflation has peaked.

“The US CPI for April is the highlight of today, indeed the week,” Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, wrote in a note.

“The consensus of US economists expects headline inflation to slow significantly from 1.2% per month in March to just 0.2% per month in April as retail gasoline prices have stabilized. But core inflation is expected to rise slightly from 0.3% m/m in March to 0.4% m/m in April,” Capurso said.

Oil prices rise more than 2%

Oil prices rose in afternoon Asian trading hours, with international benchmark Brent crude futures rising 2.94% to $105.47 a barrel. US crude futures rose 2.95% to $102.70 a barrel.

The US Dollar Index, which tracks the greenback against a basket of its peers, was at 103.648 after posting a previous high of 103.961.

The Japanese yen traded at 129.90 per dollar, stronger compared to levels above 130.5 seen against the dollar earlier this week. The Australian dollar changed hands at $0.6984 as it struggles to rebound after falling from above $0.70 earlier in the week.

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