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Asian Stocks Down Over Mixed Chinese Inflation Data

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By Gina Lee

Investing.com – Asia Pacific stocks were mostly down Wednesday morning but moves remained small. Investors digested mixed inflation data from China while awaiting the same data from the U.S later in the week.

The benchmark 10-year U.S. Treasury yield steadied from a fall to an intraday one-month low. Yields eased for a third consecutive week.

China’s Shanghai Composite edged up 0.13% by 10:22 PM ET (2:22 AM GMT) while the Shenzhen Component was down 0.29%. Chinese consumer price index (CPI) for May, released earlier in the day missed forecasts, contracting 0.2% month-on-month and growing 1.3% year-on-year. However, the producer price index (PPI) exceeded expectations, growing 9% year-on-year.

U.S.-China relations are also back in the spotlight as the U.S. Senate passed a bill to counter the economic as well as strategic challenge from China. The U.S. Innovation and Competition Act of 2021 bill to invest almost $250 billion in bolstering U.S. manufacturing and technology passed on Tuesday by a 68-32 vote.

Although the bill’s passage was a rare show of bipartisanship in a chamber that remains divided on other issues, it remains to be seen if the House of Representatives will also pass the bill.

Hong Kong’s Hang Seng Index inched up 0.01%.

South Korea’s KOSPI was down 0.21%. The country’s GDP grew 1.7% quarter-on-quarter in the first quarter of 2021, exceeding both the 1.6% growth in forecasts prepared by Investing.com and the previous quarter's 1.2% growth.

Japan’s Nikkei 225 was down 0.25% and In Australia, the ASX 200 inched down 0.09%.

On the data front, the U.S. will release its consumer price report, including the CPI, for May on Thursday. The report is expected to affect perceptions of when the U.S. Federal Reserve will start tapering its asset purchases ahead of its policy meeting scheduled for the following week.

As investors await the data, debate on whether inflation will prove to be more long-term, prompting central banks to withdraw unprecedented stimulus measures earlier than expected, continues.

However, some investors remained assured by the Fed’s continuous assurances that inflation will prove temporary. Global shares continue to remain near a record high despite volatility remaining in sectors such as cryptocurrencies and meme shares.

“The tight trading ranges seen so far this month reflect the cautious mood in the market ahead of the inflation numbers,” City Index senior financial markets analyst Fiona Cincotta told Bloomberg.

“Whilst the Fed reassures that this spike in inflation is temporary, policymakers will need to be out in their droves to calm the market,” Cincotta added.

Investors also await the European Central Bank’s policy decision due to be handed down on Thursday. The U.K.’s Cornwall will also host the Group of Seven (G7) leaders’ summit due to open on Friday.

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