Asia Pacific markets were weaker late in the session after CPI figures from China rose 2.8% in April, marking the fastest pace in 18 months. Analyst estimates had called for a reading of 2.7%. Property prices continue to soar with, with the NCRC housing price index rising 12.8%, beating consensus estimates of a rise of only 11.6%. The news fueled concerns that the government may raise rates in an attempt to combat inflation. China has been trying to cool an overheating economy and prevent a burst in the nation's surging property bubble. Just last week, the government raised reserve requirements for the third time this year. With today's data, it seems likely officials will implement additional policy tightening measures, which will stand to limit advances in commodity currencies that rely heavily on Chinese demand. The Shanghai SE composite fell by 1.9%, with the Hang Seng and the Nikkei both lower by 1.4% and 1.1% respectively. The momentum carried over into the European session with equity bourses weaker across the region, early in London trade.
Commodities came under pressure with crude oil falling by 1.8% to $76 per barrel, and copper weaker by nearly 2% at $313.8. Prices are likely to remain heavy on dollar strength and continued fears that policy tightening in China will curb demand. Gold, which has advanced more than 4.5% in the last four sessions, made new 5-month highs above $1213. Reduced risk appetite should provide support for gold, which is often used as a gauge of market sentiment.
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