China Stocks Drop After Data; Korea Climbs

Chinese stocks retreated Thursday, prompting a pullback in some other Asian markets after data showing consumer prices rose more than expected.

The Shanghai Composite  dropped 0.7%, and Hong Kong’s Hang Seng Index  fell 0.2% in afternoon trading.

Government data released earlier in the day showed China’s consumer price index rose 2.4% in April from the year-ago period, driven by food prices. The producer price index, which measures wholesale prices, dropped a sharper-than-expected 2.6%.

Bank of America Merrill Lynch China economist Ting Lu said that although consumer prices quickened, a steeper fall in wholesale prices during the month were likely to limit market reaction.

“Inflation pressure is quite low, and the room remains big for the new government to maintain relatively accommodative monetary and fiscal policies. However, we expect no additional stimulus, as growth could naturally recover a bit, and policy makers can tolerate a lower growth,” Lu said.

Japan’s Nikkei Stock Average  fell 0.7% and Australia’s ended marginally lower, with both benchmarks unable to hold on to early gains. Each had ended Wednesday at their highest level since June 2008.

The drop in Sydney came as monthly employment data showing the Australian economy added substantially more jobs than expected in April. The strong employment data raised doubts the central bank would lower interest rates further after trimming the benchmark cash rate Tuesday.

The Kospi , meanwhile, climbed 1.2% after a surprise interest-rate cut by the Bank of Korea.

Most other Asian markets advanced after U.S. and German equities climbed further into record territory, but couldn’t hold on to those gains.

The Dow Jones Industrial Average  and the Standard & Poor’s 500 Index both ended at record highs in the U.S. on Wednesday, while the German benchmark index also finished at an all-time peak.

Futures on the Dow Jones Industrial Average and the S&P 500 were both mildly negative in Asian afternoon trade, also giving up early advances.

Major movers

Chinese property developers fell after the inflation data. Gemdale Corp.  lost 3.6% in Shanghai, China Vanke Co.’s  yuan-denominated A shares retreated 1.8% in Shenzhen, and China Overseas Land & Investment Ltd.  shed 1% in Hong Kong.

The “key for CPI is that it is still below the government target for the year. The question is whether this is a reflection of a wider slowing of the economy,” said Andrew Sullivan, director of sales trading at Kim Eng Securities.

In Tokyo, a strengthened yen also hurt several exporters as the U.S. dollar slid further below the ¥99 level.

Shares of Toyota , which reported that its profit more than doubled in the quarter ended March 31 on the back of strong sales in the U.S. and a weakened yen, gave up early gains to finish 1.4% lower.

Among other firms that also rely heavily on international sales and are adversely affected by a stronger yen, Canon Inc.  fell 1% and Honda Motor Corp.  dropped 1.3%.

Shares of Toshiba Corp.  tumbled 4.9% after its earnings fell short of expectations.

Among gainers, Daikin Industries Ltd.  soared 6% after the company posted an increase in annual profit.

Resona Holdings Inc.   added 1.5% after the Nikkei reported the financial-services firm planned in five years to repay the public funds it owes the government.

In Seoul, banks climbed after the Bank of Korea’s interest-rate cut by a quarter-point to 2.5%, where most economists had expected no change.

Shares of KB Financial Group Inc. rose 3.1%, and Shinhan Financial Group Co.  gained 2.5%.

In Sydney, banks were mostly lower after data showing the local economy added as many as 50,100 jobs in April, trouncing expectations for an addition of 12,000 jobs. The data came after 36,000 jobs were lost in March.

National Australia Bank Ltd.   dropped 2.1% and Australia & New Zealand Banking Group    lost 2.8%.

“Looking through the noise, it does appear that employment has improved since the beginning of this year,” HSBC’s Australia and New Zealand chief economist Paul Bloxham wrote to clients in a report.

“The labor-force data are providing some evidence that the soft patch in growth may be behind us. Recent indicators also suggest that [first-quarter gross domestic product] is likely to be strong. The Reserve Bank of Australia may not need to ease any further,” Bloxham said.

Advancers included News Corp.   , shares of which climbed 2.9%.

The media conglomerate posted fiscal-third-quarter earnings excluding items of 36 cents a share, beating analyst expectations by 1 cent a share. Revenue totaled $9.54 billion, ahead of projections of $9.14 billion. News Corp. is the owner of MarketWatch, the publisher of this report.

Also in Australia, Billabong International Ltd.  requested that trading in its shares be suspended, pending an announcement related to transactions affecting the surfwear retailer, which has been in takeover talks.