Asian shares drop sharply as US price data revives rate hike jitters
By Ankur Banerjee
SINGAPORE (Reuters) — Asian shares slid on Friday while the dollar was firm after U.S. consumer prices increased more than expected, bolstering the case for the Federal Reserve to keep rates higher for longer.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.94% on Friday, on course for its biggest one-day percentage drop in a week, having scaled a three-week high on Thursday.
Declines for Chinese stocks were particularly large after data earlier in the day showed China's consumer prices were flat in September, while factory-gate prices shrank at slower pace, indicating deflationary pressures persist.
China's blue-chip stock index CSI300 fell 0.80%, while the Hang Seng Index sank 1.5% in early morning trade.
In contrast, Japan's Nikkei was 0.13% lower, while Australia's S&P/ASX 200 index lost 0.25%.
The increase in U.S. consumer prices for September contained a surprise surge in rental costs and traders now see a stronger chance the Fed will end up delivering another hike this year.
Futures contracts that settle to the Fed policy rate reflect about a 40% probability of a rate hike in December, compared with about a 28% chance seen before the inflation report.
Ryan Brandham, head of global capital markets, North America at Validus Risk Management, said the CPI data highlights the challenges the Fed will face bringing inflation down to its 2% target.
Separate data also showed the number of Americans receiving benefits after an initial week of aid, a proxy for hiring, increased 30,000 to a still-low 1.702 million during the week ended Sept. 30.
«The labour market softening is key to the Fed achieving its goal of returning inflation to target, and the hawks calling for at least another
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