Sharply rising food prices in China pushed up inflation to a one-year high in the world's second largest economy.
The consumer price index (CPI) unexpectedly rose to 2% in August from a year ago, mainly on higher food prices and not due to a pick up in economic activity.
On the back of that, the producer price index (PPI) fell 5.9% - marking its 42nd consecutive month of declines.
Deflation fears in China are growing as manufacturers continue to cut prices.
The decline in the PPI was the biggest drop since the global financial crisis in 2009 due to falling commodity prices and slumping demand.
Economists said the continuing fall in producer prices poses the risk of trickling through to consumer prices.
"The change in PPI is very worrying. It could affect corporate profitability, which in turn could affect consumption and the economy," said Li Huiyong, economist at Shenyin & Wanguo Securities.
Rising pork prices
Meanwhile, pork prices which weigh heavily on consumer prices in China, rose from 16.7% last year to 19.6% in August, while vegetable prices surged from 9.7% to nearly 16%.
"A sharp fall in pig numbers in recent months will continue put upward pressure on pork price inflation," said Julian Evans-Pritchard, China economist at research firm Capital Economics.
Economists are expecting the government to step up with more policy measures to stimulate the economy.
Speaking at the World Economic Forum in Dalian on Thursday, Premier Li Keqiang was the latest policymaker to reiterate that the government will continue to support the economy to ensure stable growth.
A pedestrian holding her umbrella is reflected on an electronic board showing the Japan's Nikkei average outside a brokerage in Tokyo, Japan, September 4, 2015.
REUTERS/YUYA SHINO
Global shares surged on Wednesday, led by the biggest daily gains in Japan for seven years, helping lift the dollar and oil prices as the prospect of more stimulus from China soothed investors rattled by recent market turmoil.
The charge into stocks pushed yields on low-risk government bonds higher, with the rise exacerbated by the anticipation of auctions of German and U.S. 10-year debt later in the day.
European shares rose, with the pan-European FTSEurofirst 300 index .FTEU3 up more than 2 percent in early trade.
The stock market gains were sparked by a rally in Chinese shares on Tuesday, when weaker-than-expected August trade reinforced investors' expectations that Beijing would act to bolster slowing growth in the world's second-largest economy.
China's Finance Ministry said on Wednesday it would strengthen fiscal policy, boost infrastructure spending and speed up tax reform, helping lift Chinese shares for a second day. The Shanghai Composite .SSEC closed 2.3 percent higher and the CSI 300 index.CSI300 rose 1.96 percent while Hong Kong's Hang Seng .HSI was up 4.5 percent.
Angus Gluskie, managing director of White Funds Management in Sydney, described Wednesday's stock rally as a "speculative bounce".
"The market will remain susceptible to a return of negativity until we see signs of some improvement in the original causes of weakness, which were predominantly Chinese growth concerns," he said.
Signals from Prime Minister Shinzo Abe that Japan will cut corporate taxes pushed the Nikkei 225 .N225 stock index up 7.7 percent, the most it has risen in a day since the depths of the global financial crisis in October 2008.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS also rallied hard, rising 3.3 percent, with gains across all the major indices.
Early indications from U.S. stock index futures ESc1 were that Wall Street would rally further later in the day.
Investors' increased appetite for risk saw the dollar firm against the safe-haven yen and the euro. The single European currency EUR= was down 0.2 percent at $1.1182 while the yen was 0.7 percent weaker at 120.66 per dollar.
Notable gainers in the currency markets were the Australian AUD= and New Zealand dollars NZD=. Both countries are exposed to Chinese growth.
RISK SENTIMENT
"I don't see an end to risk sentiment driving currencies any time soon," said Shusuke Yamada, chief Japan FX strategist at Bank of America Merrill Lynch in Tokyo.
"It all goes back to China, where opaqueness remains over its currency market, monetary policy and capital controls. The forex market is most on edge about a further possible devaluation of the yuan."
Crude oil prices edged higher. Brent, the global benchmark LCOc1, was trading 20 cents a barrel higher at $49.72.
"Stabilization in Chinese equity markets has ... played an important role," ABN Amro analysts said.
German 10-year bond yields DE10YT=TWEB rose 3 basis points to 0.71 percent. German is due to sell 4 billion euros of the paper at around 0930 GMT.
U.S. 10-year Treasury yields US10YT=RR, which rose in New York on Tuesday with shares, headed higher still and were last up 3 bps at 2.22 percent. The Treasury Department will sell $21 billion of the notes on Wednesday.
"The environment for the auctions seems tricky amid the ongoing concerns about Chinese selling (of Treasuries). No one really knows how Chinese demand is going to behave and that's creating uncertainty here," said Commerzbank strategist Michael Leister.
Gold XAU= held above a three-week low, last trading at $1,120 an ounce, having fallen as low at $1,116.20 earlier this week.
(Additional reporting by Nichola Saminather in Singapore, Lisa Twaronite in Tokyo, Emelia Sithole-Matarise; Editing by Alison Williams)
Saudi Arabia will cut spending and delay some state projects after the recent decline in the price of oil, Finance Minister Ibrahim al-Assaf said.
Talking to broadcaster CNBC Arabia, he said the country was in a good position to manage low oil prices.
Saudi Arabia, the world's largest oil exporting country, has maintained its production levels despite a collapse in the price of oil.
Oil is trading at less than $50 per barrel, half the price of a year ago.
"We have built reserves, cut public debt to near-zero levels and we are now working on cutting unnecessary expenses while focusing on main development projects and on building human resources in the kingdom," he said in the interview.
Some areas of the economy will still receive investment, he said, as the country tries to improve industries outside energy.
"Projects in sectors such as education, health and infrastructure are not only important for the private sector but also for the long-term growth of the Saudi economy," he said. He did not give details of where cuts would happen.
It may issue bonds, or Islamic bonds known as sukuk to finance some spending, he said.
The kingdom has more than $600bn in reserves it can draw upon should expenditure outstrip income from oil exports.
Europe’s biggest stock exchange, which built its market share in an era of speedy, sliced-up equity trading, is targeting blocks for the first time.
Bats Chi-X Europe will introduce an order book next month that prioritizes size over speed, according to a statement on Monday. The new order book will try to help traders buy and sell blocks via frequent auctions, such as those that commonly take place at the beginning and the end of trading on traditional exchanges.
Norway’s sovereign-wealth fund, the world’s largest, is among those who have complained that the proliferation of trading venues has resulted in shrunken stock trades, making it harder to place their big orders.
“It’s a clever idea,” said Adam Conn, head of dealing at Baring Asset Management in London. “With all of these things, the proof will be in the eating.”
Others are also diving into block trading. London Stock Exchange Group Plc’s Turquoise venue has built tools to enable the practice. A consortium of banks and asset managers plans to open a new venue for block trading. Firms including Investment Technology Group Inc. and Liquidnet Holdings Inc. also offer it.
“For people who trade in large size, like us, liquidity has become the biggest challenge that we have,” said Gianluca Minieri, Dublin-based global head of trading at Pioneer Investment Management, which oversees $244 billion.
A customer suggested looking into auctions, according to Chief Operating Officer David Howson. Under Howson’s direction, the European arm of Bats Global Markets Inc. started developing the project about seven months ago and plans to offer periodic auctions from Oct. 19.
The new order book, the firm’s first since 2009, will hold auctions for more than 4,000 European stocks throughout the trading day. Intervals between the auctions will range between about 100 milliseconds and 5 minutes, depending on the liquidity of the stock.
Even the most frequent auctions will be much slower than the trading on other Bats’ books -- about 1,000 times slower. Because Bats is introducing a separate book, the auctions will not interrupt continuous trading in its other markets.
That differs from the approach taken by the LSE. Last year, the stock exchange said it would halt continuous trading in London to hold a third auction. It’s designed to attract block trades, and some say it’s meant to lure trading away from competitors such as Bats.
“The only doubt I have is that perhaps the proliferation of new initiatives and new platforms might have gone too afar,” Minieri said. “New venues are useless if there’s not liquidity.”
Block trades are tricky because investors worry they could be susceptible to gaming or that the market could move while the order is awaiting a match.
Bats tries to calm those concerns by randomizing the end of the auctions. That makes it harder for traders to predict and potentially exploit orders. Bats will also cancel auction trades if the stock rises or falls past a threshold before the auction can be concluded. The exchange operator is adding to its surveillance measures to try to prevent predatory trading.
Regulators have tried to make stock prices more widely available to investors. They’ve done in part by imposing limits on dark pools, as off-exchange venues that don’t publish prices are called. Crucially, the limits have a waiver for block trades deemed large-in-scale.
“The elephant in the room is the dark volume caps,” Baring’s Conn said. “That is one of the catalysts for the latest round of initiatives.”
Bats’ new order book isn’t a dark pool, so it won’t be subject to the restrictions, which come into force at the beginning of 2017. If the new book attracts trades away from dark venues, it could also help prevent stocks from breaching regulatory limits.
The European Central Bank (ECB) has cut its inflation and growth forecasts for 2015 and the next two years.
It expects inflation in the eurozone to remain "very low" for some years as threats to economic growth increase.
ECB president Mario Draghi said Europe's economic recovery would continue, "albeit at a somewhat weaker pace than expected".
The euro fell sharply as Mr Draghi also hinted that the bank could expand its stimulus programme if necessary.
He was speaking after the ECB kept its main interest rate on hold at 0.05%.
The ECB is now forecasting economic growth in the eurozone of 1.4% in 2015, down from 1.5%, and 1.7% in 2016, compared with its previous projection of 1.9%.
However, Mr Draghi said that risks to the outlook for economic growth and inflation had worsened since mid-August, when the latest projections were calculated.
Euro falls
"Lower commodity prices, a stronger euro, somewhat lower growth, have increased the risk to a sustainable path of inflation towards 2%," he told a news conference in Frankfurt.
The euro fell sharply following Mr Draghi's comments, dropping a cent against the dollar to $1.1127.
He also admitted that inflation could turn negative in the coming months.
The bank expected inflation to be 0.1% for 2015, rising to 1.5% in 2016 and 1.7% in 2017, dampened by lower energy prices.
The ECB made no change to its bond-buying programme, but Mr Draghi said it could be extended beyond its planned conclusion in September 2016 if necessary.
Analysis: Andrew Walker, economics correspondent
What was the (not very) coded message in Mario Draghi's remarks? That the ECB's Governing Council is very uneasy that inflation remains too low and is not responding as quickly as hoped to the quantitative easing programme launched earlier this year.
It was also clear that the ECB was ready to strengthen the programme by running it for longer - it is planned to run until September next year - spending more each month on it, or by buying a wider range of assets.
It all depends on the economic data - essentially whether it looks like inflation is going to get back to the target of below or close to 2%. It remains way below that figure and is not getting closer, so more eurozone QE looks like a strong possibility.
Fears of negative inflation - also known as deflation - prompted the bank to start its quantitative easing programme in March.
The ECB has been buying €60bn of government bonds a month in a bid to increase inflation in key economies such as France and Germany.
However, eurozone inflation stood at just 0.2% in August - far below the 2% target.
Howard Archer, of IHS Global Insight, said: "The door is now clearly wide open to the ECB stepping up its near-term pace of quantitative easing and/or increasing its overall size and duration. Whether the ECB steps through that door will clearly depend on whether eurozone growth continues to struggle and inflation prospects deteriorate further."
Image copyrightReuters
The central bank also kept the rate for bank overnight deposits on hold at minus 0.2%, which means banks must pay to hold funds at the central bank.
'Unspectacular' growth
Earlier on Thursday, a survey indicated that activity among eurozone businesses rose at the fastest pace for more than four years in August.
The composite purchasing managers' index (PMI) compiled by Markit rose to 54.3 last month, up from July's figure of 53.9. A figure above 50 indicates expansion.
Markit chief economist Chris Williamson said the PMI figures suggested that the eurozone's economy would grow by 0.4% in the third quarter of the year, which he called "a solid - albeit unspectacular - rate of expansion".
Eurostat said on Thursday that eurozone retail sales rose by 0.4% in July compared with June, roughly in line with expectations and considerably better than the 0.2% decline in June.
Consumer confidence appeared to be particularly strong in Germany, Europe's biggest economy, where retail sales jumped by 1.4% last month.
A pedestrian is reflected on an electronic board showing the graph of the recent fluctuations of the Japan's Nikkei average outside a brokerage in Tokyo, Japan, August 27, 2015.
REUTERS/YUYA SHINO
Fresh government intervention to support China's jittery markets and bets on a more dovish stance from central bankers provided limited respite from a stock market sell-off on Wednesday as oil resumed its fall.
European equities gave up early gains, with commodities stocks the hardest hit, as U.S. crude CLc1 fell more than $1 to $44.39 a barrel. Brent crude LCOc1 was down 89 cents to $48.67.
There had been some early relief after Chinese stocks managed to bounce from steep losses and end the day flat, following fresh supportive measures from brokerages eased investor fears of a trading crackdown from Beijing.
Benchmark indexes in Paris, Frankfurt and Milan were broadly flat and outperforming a slightly negative European market at 0842 GMT.
"Trader and investor nerves are a bit fragile at the moment...People are just unsure at the moment of whether this is a good buying opportunity or not," said Paul Chesterton, a trader at brokerage Peregrine & Black.
A recent surge in financial market volatility, driven by fears over China's economic slowdown and its impact on world growth, has seen the Chinese central bank pump cash into the economy and also fueled bets that the U.S. Federal Reserve will delay raising interest rates as early as this month.
With the European Central Bank's policy meeting due on Thursday, traders said there were growing expectations for a dovish stance in the wake of the market turmoil. The ECB launched its bond-buying scheme, or quantitative easing, this year and it has pledged to intervene further if needed.
"Investors are keenly awaiting (ECB President Mario) Draghi's press conference tomorrow and a lot of investors are not taking major positions ahead of that," said RIA Capital Markets strategist Nick Stamenkovic.
"The likelihood is that he is going to adopt a dovish posture given the rising global headwinds and the market will pay particular attention to the inflation forecasts for 2016 and 2017."
German 10-year yields DE10YT=TWEB, the benchmark for euro zone borrowing costs, were 1 basis point lower at 0.79 percent. Yields on other top-rated bonds were down by a similar amount.
The U.S. dollar rose and took the heat out of a rush to unwind carry trades that boosted the safe-haven yen and the low-yielding euro in recent weeks.
"There has been a moderation in risk aversion with European stocks and Wall Street stock futures in the green. That has seen the yen give up some of its recent gains," said Alvin Tan, currency strategist at Societe Generale.
"U.S. payrolls will be the focus, but I doubt it will change the current debate over whether the Federal Reserve will hike rates in the near term or not."
Emerging market stocks fell for the third straight day, down half a percent and approaching recent 6-year lows .MSCIEF while the rouble extended the previous session's 3.8 percent fall against the dollar which was the biggest one-day loss in three months RUB=.
Asian shares fell for a third straight day on Wednesday as weak manufacturing reports from China, the United States and Europe fueled worries about slowing global growth.
(Reporting by Lionel Laurent; Editing by Toby Chopra)
India's economy grew at an annual rate of 7% between April and June, official figures have shown.
This is slower than the 7.5% growth recorded for the previous quarter, and lower than expected.
India and China - which also posted 7% growth in the second quarter - are now the joint fastest growing major economies in the world.
But some economists have expressed concerns that India's official figures do not accurately reflect true growth.
"At face value, today's GDP figures for [the second quarter] suggest that India matched China as the world's fastest-growing major economy last quarter," said Shilan Shah at Capital Economics.
"But the GDP data remain inconsistent with numerous other indicators which suggest that, at best, the economy is in the early stages of recovery after three years of tepid growth.
"The official GDP data are overstating the strength of the economy, most probably by a significant margin."
'Boost'
With concerns about slowing growth in China, some investors are starting to turn to India as the next driver of global growth.
Some were expecting stronger growth than 7% - in two of the previous three quarters, the Indian economy grew faster than China.
"The GDP number is disappointing but, overall, going ahead we expect India's economic growth to be driven by domestic demand," said Madhavi Arora, from Kotak Mahindra Bank in Mumbai.
"With commodity prices falling, there should be a boost to corporate margins going ahead and household spending should also go up."
Analysis: Simon Atkinson, editor, India Business Report, Mumbai
There will be plenty of people disappointed with this number. Some economists I've spoken to recently thought GDP growth would be closer to 8% - streaking ahead of China's.
Digging into the detail - it looks like growth in Indian manufacturing has slowed from a year ago - a bit of a blow given this is one of the Modi government's main initiatives.
And whether pace picks up in the July-September period will largely depend on the weather. This is the monsoon season and when rains are good and harvest plentiful, rural consumption goes up as people working in agriculture have more money to spend.
But, so far, many parts of the country have seen less rain than you'd expect.
