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  18 Oct 2021, 10:16

Asian markets drop on inflation woes, China growth slows further

   HONG KONG, Oct 18, 2021 (BSS/AFP) - Asian markets struggled Monday as
inflation concerns returned to the fore, with commodity prices rallying and
central banks preparing to roll back their ultra-loose monetary policies.

   Adding to the grey mood was data showing growth in China's economy, the
world's second-biggest, slowed further in the third quarter, hit by a
property-sector crisis and a looming energy crunch.

   The losses follow a healthy run-up last week across the world fuelled by a
strong start to the earnings season, which helped distract from surging
prices.

   However, a further rise in the oil market -- WTI is at a seven-year high
and Brent is at a three-year peak -- has refocused attention on the threat of
inflation.

   Data last week showed Chinese factory-gate costs at their highest in a
quarter of a century in September, while US wholesale inflation hit a record.

   And on Monday, New Zealand said prices rose at their quickest rate in a
decade.

   The figures have increased pressure on central banks around the world to
tighten the easy money policies put in place at the start of the Covid-19
pandemic, which have been key to a strong economic and equity market
recovery.

   Some banks -- including in South Korea and New Zealand -- have already
hiked borrowing costs while the Bank of England has indicated it is close.

   Meanwhile, the US Federal Reserve is expected to begin paring its bond-
buying programme before the end of the year, and some observers are
suggesting it could lift interest rates possibly before 2023.

   The prospect of higher rates and less cheap cash has weighed on sentiment
for several months and reassurances that inflation would only be temporary
have been overtaken by the surging energy costs caused by reopenings around
the world and a recovery in demand.

   The lifting of travel restrictions into the United States from next month
will likely add further upward pressure to prices.

   "How risk markets respond to the bringing forward of rate hike
expectations will be key to watch this week, as will anecdotes from the
profit reporting season to see how firms are dealing with higher input costs
and to what extent they are able to pass this onto consumers," said National
Australia Bank's Tapas Strickland.

   - Bitcoin closes on record high -

   In early trade, Tokyo, Hong Kong, Shanghai, Singapore, Seoul, Wellington,
Manila and Jakarta were all down, though Sydney and Taipei edged up.

   China on Monday said growth eased to 4.9 percent in July-September,
slightly slower than forecasts, as a crackdown on the real estate sector
dealt a severe blow to a crucial part of the economy.

   That has come at the same time as a worsening energy crunch across the
country -- partly caused by government emissions targets -- that has forced
some businesses to scale back activity.

   Still, there was some joy for investors in comments at the weekend from
the People's Bank of China, with top officials saying the risk of spillover
from embattled property giant Evergrande to the financial sector was
"controllable".

   Bitcoin rose above $62,500 as it homed in on its record high, with
optimism that the Securities and Exchange Commission will allow the first US
exchange-traded fund for cryptocurrency futures to begin operating this week.

   The digital currency hit its all-time high of $64,870 in April before
plunging on Chinese regulatory concerns.

   The move would make the unit a financial instrument tradeable like other
securities, making it more attractive to traditional investors.

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