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Asian Stocks Decline; But Not From Chinese Inflation Data

David Becker
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Asian Stocks Decline; But Not From Chinese Inflation Data

China’s inflation readings were the most important data reported Tuesday. However, it did not seem to affect Chinese or Asian equities, in the wake of the largest decline in US stocks in nearly a month. After the US market closed yesterday, Alcoa kicked off the earnings season with a report showing stronger than expected profits and revenues. While the Shanghai stock market declined 1.23%, the Hang Seng dropped 1.54%.

China’s CPI rose 2.3% from a year ago, a touch less than expected and down from the 2.5% pace reported for May. Food price rose 3.7% in June after a 2.7% pace in May. However, non-food prices remain tame at 1.7%. Producer prices continued to fall as they have since early 2012. The 1.1% decline in June year-over-year is the smallest decline in two years. With inflation contained, there is some room to maneuver if needed. The yuan traded at its best level since early April today, as the Strategic Economic Dialogue talks with the US begin.

What seemed to be the catalyst for the decline in global equities was the US jobs availability data released on Tuesday. The JOLTS data underscored, the Federal Reserve is making palpable progress toward its other two mandates, which is price stability and full employment. In addition, the consumer credit data showed another healthy rise. However, the jump in credit card usage in April was not repeated in May. The $19.6 billion increase in overall consumer credit in May caps a three-month period that saw the fastest rise since early 2011. Non-revolving credit, which increases auto and student loans, rose $17.8 billion, the most in a year.

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