A mixed reading on Chinese inflation Thursday kept Asian equities traders on edge in fresh volatility Thursday as markets retreated from a two-day rally, while fears of a US interest rate hike saw safe assets advance.
Early selling spread through regional exchanges, with Hong Kong and Shanghai seeing hefty losses, despite Chinese Premier Li Keqiang the day before seeking to shore up confidence in the government's handling of an economic crisis that has sent global markets plunging.
A late tumble on Wall Street provided extra reason to run after a report showing a tighter US jobs market increased speculation the Federal Reserve will pull the trigger on a rate rise at next week's policy meeting.
Thursday's losses follow thumping gains across the world over the previous two days -- including a 7.7 percent jump in Tokyo Wednesday -- which were helped by Chinese moves to bolster its economy.
However, Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors Ltd. in Sydney, told Bloomberg News: "Markets will remain volatile until the Fed meeting next week.
"Investors are again focusing on the potential US interest rate increase and how it would impact emerging markets."
In Beijing, official figures showed the consumer price index (CPI) rose two percent last month, better than July's 1.6 percent and beating forecasts of 1.8 percent.
However, the producer price index (PPI) -- a crucial measure of costs for goods at the factory gate and a leading indicator of the trend for consumer prices -- slumped at its fastest rate in six years.
The figures will do little to ease the struggle authorities have in kickstarting the world's number two economy and main driver of global growth as it suffers a painful slowdown.
"This is a real problem," said Zhu Qibing, a Beijing-based analyst at China Minzu Securities Co. "For a manufacturer, CPI represents its costs because wages rise, and PPI represents the prices of its product. Now profits of enterprises are being further eroded."
- Li tries to reassure -
On Wednesday China's Li said the government was capable of maintaining high growth, trying to stem fears about the latest crisis to the global economy.
Li's comments came after China said the day before it will adopt "stronger" fiscal policies to support growth.
He also defended Beijing's decision last month to devalue the yuan currency -- which sparked a worldwide rout -- saying it "will maintain a reasonable equilibrium level".
Despite his promises regional markets sank Thursday, with Shanghai losing more than one percent in the morning, Hong Kong 2.20 percent lower and Tokyo almost three percent off by lunch. Sydney, where several firms with close business ties to China are listed, was more than two percent lower.
On currency markets high-yielding, or riskier, assets retreated as well as traders fret over a possible Fed monetary tightening.
The Labor Department's so-called JOLTS report on the US jobs market showed vacancies rose to 5.75 million in July, the highest level since the data was first reported in 2000.
The news revived talk of a September rise in borrowing rates, which would likely drag on investment opportunities and fuel a flight of capital back to the the United States in search of better returns.
While such a move would boost the dollar, the yen, a go-to unit in times of unease, picked up.
The dollar bought 120.24 yen, compared with 120.54 yen in New York where it at one point earlier it broke 121 yen.
The euro eased to 134.88 yen from 135.05 yen in US trade. The single currency had touched 135.15 yen earlier Wednesday.
The Australian dollar was down 0.3 percent, while emerging market units also suffered with the South Korean won 0.33 percent down and the Malaysian ringgit 0.8 percent lower.
New Zealand's dollar sank 1.8 percent after its central bank cut interest rates again and indicated further easing could follow in coming months.