Asian Stock Market: Trades lower on renewed US-China fears, all eyes are on US CPI

• Asian stock markets trade in negative territory on Thursday ahead of the key event.
• The fears of possible deflation in China exert pressure on Chinese equities.
• US President Joe Biden issued an executive order about the restriction on China.
• The Indian central bank decides to hold the key interest rate unchanged at 6.50%.
• All eyes are on the US Consumer Price Index (CPI), due on Thursday.

Asian stock markets trade lower on Thursday. Markets turn cautious amid concern over the possible deflation in China and the renewed trade war tension between the US-China. Market players prefer to wait on the sidelines ahead of the highly anticipated US inflation data.

At press time, China’s Shanghai drops 0.26%, the Shenzhen Component Index falls 0.54%, Hong Kong’s Hang Sang falls 0.95%, India’s NIFTY 50 is down 0.25%, South Korea’s Kospi dips 0.40%, and Japan’s Nikkei rises 0.66%.

The fears of possible deflation in China join the trade war tension headlines, which exert pressure on Chinese equities. Earlier on Thursday, US President Joe Biden issued an executive order about the restriction on China. That said, the US intends to target only Chinese companies that generate more than 50% of their revenue from quantum computation and artificial intelligence (AI).

China's Commerce Ministry expressed severe worries in response to the US executive order restricting some investments in Chinese technology businesses, according to Reuters. The Chinese authorities added that they hope the US will respect market laws and the principle of fair competition.

In India, the Reserve Bank of India (RBI) decides to maintain the status quo and holds the key interest rate unchanged at 6.50% for the third consecutive time. RBI Governor Shaktikanta Das said the central bank is expected to see inflation drop to 5.2% in Q1 of the fiscal year 2025.

In Japan, the Bank of Japan (BoJ) revealed on Thursday that the Producer Price Index (PPI) for July fell to 3.6% from 4.1% prior and was above the expectation of 3.5%. On a monthly basis, the figure increased to 0.1% MoM from -0.2% in the previous month and was worse than expected at -0.2%. The data suggests that inflationary pressures in Japan are currently increasing.

All eyes are on the highly anticipated US inflation data due later in the American session. The US Consumer Price Index (CPI) is expected to rise from 3% to 3.3%, and the core CPI is expected to remain unchanged at 4.8%. The economic data could give direction to riskier assets like gold, crude oil, equities, the AUD/USD, etc.