Asia stock markets weaken ahead of US inflation data

By Scott Murdoch

SYDNEY (Reuters) – Asia stock markets were softer on Monday ahead of U.S inflation September data this week with investors seeking signals about the Federal Reserve’s next likely moves on interest rates.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4%, after U.S. stocks ended the previous session with mild gains.

Australian shares and Japan’s Nikkei stock index both lost 0.25%.

In Hong Kong, the Hang Seng Index was down 1.4% on falls for property stocks and after e-commerce giant Alibaba Group dropped 3.1% on the surprise departure of outgoing CEO Daniel Zhang from its the cloud unit. China’s bluechip CSI300 Index was up 0.37%.

The US Consumer Price Index (CPI) for August is due out on Wednesday. Inflation is expected to rise 0.6% month-on-month for August, which would take the year on year rate to 3.6%, according to a Wells Fargo research note.

Investors are pricing in a 93% probability that the Fed will keep rates at current levels after its next meeting ends on Sept. 20 but only 53.5% for another pause at the November meeting, according to CME group’s FedWatch Tool.

“Hawkish FOMC speakers have indicated that it may be appropriate to hold in September, and we think the committee wants time to digest incoming data,” ANZ economists wrote on Monday.

“The extent of monetary restraint in the economy encourages us to think that it will decelerate, not reaccelerate, from here.”

The yield on benchmark 10-year Treasury notes rose to 4.2939% compared with its U.S. close of 4.256% on Friday. The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 5.0033% compared with a U.S. close of 4.984%.

In China, there was an easing of deflationary pressures with consumer price index (CPI) rising 0.1% in August from a year earlier. That was slower than the median estimate for a 0.2% increase in a Reuters poll but much stronger than a 0.3% decline in July.

China also had its smallest drop in factory prices in five months. The producer price index fell 3.0% from a year earlier, in line with expectations, after a drop of 4.4% in July.

Global energy markets are also keeping a close watch on Chevron Corp’s negotiations with its workers after strikes began at key liquefied natural gas (LNG) facilities in Australia that supply 5% of the world’s output

European gas prices have been volatile since August when news of the potential labour unrest first broke.

Gas prices spiked as much as 14% after Friday’s news that strikes would start following five days of talks which resulted in no deal.

The dollar on Monday dropped 0.41% against the yen to 147.21 . It is getting closer to its high this year of 147.87 on Sept. 9.

The European single currency was up 0.1% on the day at $1.0709, having lost 1.22% in a month, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was down 0.057% at 104.79.

U.S. crude dipped 0.59% to $86.99 a barrel. Brent crude fell to 0.44% to $90.21 per barrel.

Spot gold was trading slightly higher at $1,918.3663 per ounce. [GOL/]

(Reporting by Scott Murdoch in Sydney; Editing by Edwina Gibbs)

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