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Asian shares slip on expectations of China rate hike

Asian shares slip on expectations of China rate hike

Hong Kong: Asian stocks slipped in cautious trade on Friday amid expectations of an interest rate hike in China and lingering concerns over eurozone sovereign debt.

However, markets were given some support from a batch of upbeat jobs and trade data out of the United States lifting hopes for the world’s biggest economy.

Hong Kong slipped 0.61% and Shanghai fell 0.15% while Tokyo was 0.43% off by the break.

Seoul edged 0.19% lower and Singapore dropped 0.53%. Sydney was flat.

China is due on Saturday to release key economic figures including inflation data, with dealers predicting the government will announce a fresh set of tightening measures to keep a lid on the economy.

Dealers are anticipating a rise in interest rates after October’s consumer price index showed a 4.4% year-on-year rise in prices, well above Beijing’s 3% comfort zone.

Donghai Securities analyst Wang Fan told Dow Jones Newswires “most people expect Beijing to announce policy tightening, either in the form of an interest rate hike, a hike of banks’ reserves requirement ratio or both" as soon as Friday night.

Beijing in October increased rates for the first time in almost three years as the ruling Communist party grows more concerned that the economy, which is expected to grow 10% this year, could overheat.

An increase in interest rates by Beijing could have a knock-on effect for several regional countries that rely on China’s voracious spending to boost their economies.

In Tokyo, the Nikkei was lower as dealers took profits after the index, which had risen 12% since the end of October, hit a seven-month high on Thursday.

A weak market debut by cosmetics maker Pola Orbis Holdings also dampened sentiment, dealers said, with the company ending the morning down 2.6% at ¥1,753.

European debt worries continued to weigh after ratings agency Fitch downgraded Ireland’s credit rating by three notches from A+ to BBB+ because of the deterioration in its public finances.

The move came despite a multi-billion-dollar international bailout package from the European Union and International Monetary Fund.

However, markets were given some support from US Labor Department data showing initial claims for unemployment benefits dropped more than expected last week, to 421,000, a fall of 17,000 from the prior week.

US sentiment was also lifted by figures showing a 1.9 rise in wholesale inventories in October, much higher than forecast.

On forex markets the euro fetched $1.3231 in Tokyo morning trade, almost unchanged from New York late Thursday. It also stayed flat at ¥110.84.

The dollar was at ¥83.77, marginally up from ¥83.70. New York’s main contract, light sweet crude for January delivery, rose 19 cents to $88.56 a barrel and Brent North Sea crude for January gained 24 cents to $91.23.

Gold opened at $1,388.00-1,389.00 an ounce in Hong Kong, unchanged from Thursday’s close.

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