Asian stocks weaken as China's factory-gate prices fall sharply

Most Asian stocks swung lower on Tuesday, weighed by the Chinese markets, after mainland factory-gate prices shrank at their fastest pace in three years. At the same time, reports of German stimulus plans pushed global bond prices down.

China’s producer price index fell 0.8 per cent in August year-on-year, official data showed on Tuesday — its sharpest decline since August 2016 as flagging demand at home and abroad forced businesses to slash prices.

The data pushed blue chip shares in China down 0.41 per cent, which, in turn, drove an index of Asian stocks outside of Japan 0.23 per cent lower, having traded flat earlier in the session.

“Globally, inflationary pressure remains subdued, so in that sense China is not an outlier,” said Sean Darby, global equity strategist at Jefferies.

“People are positioned very bearish, but I don’t think the market wants to be too bearish. Bond yields are reversing. Markets are a little more unsure about their expectations for central banks, because a lot of easing is already priced in.” 

Investor focus shifts to the European Central Bank, which is widely expected to introduce a package of monetary easing and stimulus measures on Thursday to offset the effects of an ongoing US-Sino trade war and a global economic slowdown. The Federal Reserve is also widely expected to cut interest rates next week as policymakers race to shield the global economy from risks, which also include Britain’s planned exit from the European Union.