Asia stocks sink as China fears worsen, U.S. inflation in focus

By Ambar Warrick 

Investing.com-- Asian stock markets fell on Thursday amid growing concerns over an economic slowdown in China, while a crash in the crypto market also dampened sentiment ahead of the release of key U.S. inflation data that is expected to factor into monetary policy. 

Hong Kong and Chinese stocks fell the most among their peers, as investors continued to pull out strong gains made in the last week. Chinese authorities denied that the country has any plans to loosen its strict anti-COVID policies, sapping local markets of any upward momentum.

China’s blue-chip Shanghai Shenzhen CSI 300 index fell 1.3%, extending losses into a third straight session, while the Shanghai Composite index shed 0.8%. Hong Kong’s Hang Seng index slumped 2.2%, also falling for a third straight session. 

The Hang Seng was dealt a double whammy of worsening Chinese sentiment and aversion to heavyweight technology stocks, which make up a bulk of the index.

Chinese stocks rallied sharply last week on unfounded speculation that the country plans to loosen its strict zero-COVID policy, which is at the heart of its economic woes this year. But with this notion being dismissed by the government, markets are expected to swiftly unwind last week’s gains. 

Weakness in China spilled over into most regional markets, with sentiment also worsened by an ongoing crash in the crypto market. South Korea’s KOSPI index dropped 0.7%, while Japan’s Nikkei 225 index shed 1%.

India's blue-chip Nifty 50 index slid 0.6%, weighed down by heavyweight automobile and bank stocks. In Antipodean markets, Australia’s S&P/ASX 200 index fell 0.5%, with major mining stocks weighed down by concerns over China. 

Markets were now cautiously positioning for U.S. CPI inflation data due later in the day. The reading is expected to show that U.S. price pressures showed little signs of easing in October, giving the Federal Reserve more impetus to keep hiking interest rates.

While expectations are growing that the Fed will hike rates at a slower pace from December, rates are also expected to peak at higher levels than initially expected. 

Asian stocks were also dealt a weak lead-in from Wall Street, which slumped in overnight trade amid uncertainty over the U.S. midterm elections. While the Republicans did not gain as many seats as expected, they are still set to take both houses of Congress.