Asian stocks extend drop after cool Chinese price data

Asian stocks extend drop after cool Chinese price data

TOKYO - Asian stocks extended losses to a one-week low on Wednesday after China's consumer price inflation cooled slightly more than expected in June, pointing to lingering weakness in the economy.

Spreadbetters predicted mixed openings in Europe, where markets were likely to get some support after Alcoa Inc (AA.N: Quote, Profile, Research, Stock Buzz) reported quarterly results late in the US session that beat analysts' expectations.

Later on Wednesday, the US Federal Reserve will release minutes of its latest policy meeting, and European Central Bank officials including President Mario Draghi are scheduled to speak.

"Despite Alcoa kicking off earnings season to a good start and the expectations of a dovish FOMC statement this evening, the bulls still seem to be in disarray after the kicking they've taken over the last two days," Capital Spreads trader Jonathan Sudaria wrote in a note to clients.

Financial spreadbetters expected Britain's FTSE 100 .FTSE to open down by 3-4 points, or 0.1 per cent. But they predicted Germany's DAX .GDAXI would open up by 21-23 points, or 0.2 per cent, while France's CAC .FCHI was seen rising 9-13 points, or 0.2-0.3 per cent.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down about 0.8 per cent, touching its lowest point since July 2 and pulling away from this week's three-year highs. Japan's Nikkei stock average .N225 ended down 0.1 per cent, pulling off its lows as the yen's gains unravelled.

China's consumer price index (CPI) rose 2.3 per cent in June from a year earlier, shy of the consensus forecast of 2.4 per cent.

"The weaker CPI reading suggests inflation pressure is muted. It provides further room for policy easing in the future on the one hand, and also signals the weak demand from the domestic economy on the other hand," said Wang Jun, an economist at the China Centre for International Economic Exchanges in Beijing.

Despite the price data, China guided its yuan towards a three-month high against the dollar in what traders said was possibly a political move as China and the United States started their annual Strategic and Economic Dialogue.

Before the Alcoa results, Wall Street sagged as investors turned cautious before the start of earnings season. The Standard & Poor's 500 index .SPX shed 0.7 per cent.

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