Asian Markets Extends Losses

IMF Rings Warning Bell For Accelerating Inflation

Asian markets continued with another day of declines on worries about the health of the U.S. economy and a threat to the regional economies from rising inflation. IMF warned that inflation was pushing some developing economies toward the tipping point of widespread hunger.

Japanese stocks stood out as the benchmark indexes in Tokyo plunged further into losses, as automotive exporters dropped after a steep decline in U.S. sales last month. The Nikkei 225 Average shed 1.3% to 13,286.37, taking its decline into a 10th straight session. The benchmark average had lost nearly 7% in the previous nine sessions. The broader Topix index, meanwhile, fell 1.4% to 1,301.15, after dropping in eight of the previous nine sessions.

In Hong Kong, the Hang Seng Index declined 1.8% to 21,704.45 and the Hang Seng China Enterprises Index shed 2.5% to 11,608.92.

China's Shanghai Composite squares off to 2,651.72 reversing a decline earlier in the day. The Shenzhen Composite increased by 1.1% to 784.89.

Meanwhile the International Monetary Fund warned that inflation was pushing some developing economies toward the tipping point of widespread hunger, and the international finance organization urged cooperation among wealthier countries to boost supplies.

In a study of 162 countries, the Washington, D.C.-based IMF said surging global oil and food prices are causing the most pain in poor countries that rely on imports.

With food taking up more than half of household spending in emerging and developing economies, the IMF warned that the share of undernourished could rise rapidly to above 40% of the total of their populations.

The statement from IMF gain importance on the back of data released for the Thailand, Indonesia and South Korea showing further accelerate, putting further pressure on central bankers to tighten monetary policy.

Thailand's consumer price inflation soared to a 10-year high of 8.9% in June, as compared with the year-earlier month, official data showed Tuesday. That was up from a 7.6% figure for May. The Thai Set declined by 1.3% to 541.76.

South Korea also reported that June consumer prices were up 5.5% from June 2007; May prices were up 4.9% from the year-earlier month. The June price surge was the highest in 10 years. South Korea's Kospi shrank 2.6% to 1,623.60.

Separately, Indonesia said that consumer prices were up 11.03% between June 2007 and June 2008, having been up 10.38% in May versus the year-earlier month. Indonesia’s Jakarta Composite closed at par with 2,378.47 on the screen.

Australia's S&P/ASX 200 gave up 0.9% to 5,094.80, marking its fourth decline in a row. However on the economic front it was a good day for the Australians as the retail sales climbed at a faster-than-expected pace in May, defying expectations that consumers would curtail spending in view of higher interest rates and surging prices for daily necessities.

Sales rose 0.7% from April on a seasonally adjusted basis, rebounding from a 0.1% contraction that month, according data released by the Bureau of Statistics Wednesday. The result beat consensus estimates for a 0.2% rise.

Spending on recreational goods rose 2.2%, marking the largest increase among sectors tracked. Spending on food rose 1%, while hospitality and services climbed 2.4%.

Spending on household goods fell 1% and department store sales were down 0.8%.

Also extending losses, South Korea's Kospi slipped 2.6% to 1,623.60 for its fifth straight session of losses while New Zealand's NZX 50 index slipped 0.4% to 3,163.39. Taiwan's weighted index declined 0.7% to 7,353.86 and Singapore's Straits Times index ended on par with 2,906.23. Philippines' Composite index shed 0.9% to 2,393.90.

India's 30-constituent Sensitive Index, or Sensex, gained 5.4% to 13,664.62 and the 50-stock S&P/CNX Nifty also zoomed up by 5.1% to 4,0.98.35.

In currency trading, the U.S. dollar bought 105.99 yen in Asia, compared with 105.39 yen in midday European trading.

Crude-oil futures extended their winning streak to four sessions Tuesday as weakness in the U.S. dollar underpinned demand for energy and global production concerns continued.

But uncertainty ahead of this week's update on U.S. petroleum supplies and some assumptions that high prices hurt energy demand kept prices in check, prompting a pullback from the day's high of more than $143 a barrel.

August crude-oil futures rose as much as $1.20 to $143.33 a barrel in electronic trading, after finishing 97 cents higher at $140.97 a barrel on the New York Mercantile Exchange.

On Wall Street, the Dow Jones Industrial Average gained 32.25 points to end at 11,382.26, rebounding from steep losses earlier in the session, after data showed that General Motors Corp.'s June sales didn't drop as much as expected. The S&P 500 index rose 4.91 points to 1,284.91, while the Nasdaq Composite gained 11.99 points to 2,304

Moving towards European markets, which extended gains backed by gains from banks and miners. The U.K. FTSE 100 index rose 1.4% to 5,558.00, the German DAX 30 index climbed 1.2% to 6,393.55 and the French CAC-40 index advanced 0.8% to 4,376.32

For the region the day started with a bang as high energy costs pushed producer prices in the euro zone to an 18-year high in May, providing more justification for the European Central Bank's view that a rate hike may be needed to stem inflationary pressures in the currency bloc.

Prices of goods leaving euro-zone factory gates rose 1.2% on the month and 7.1% on the year in May, well ahead of market expectations for a 0.8% rise on the month and a 6.6% annual gain. Euro stat revised April's producer price data upward to show rises of 0.9% on the month and 6.2% on the year.

Much of the gain was driven by soaring energy costs, which surged 4.1% over the month and 18.2% over the year in May.

Excluding construction and energy, prices rose 0.3% on the month and 3.8% on the year in May. That follows gains of 0.4% on the month and 3.7% on the year in April.

The May annual PPI gain was the highest since records began in January 1990, while the monthly gain matches a previous record high of 1.2% recorded in January 2006.

In UK construction sector saw activity fall at a record pace in June, a key survey has found. The Chartered Institute of Purchasing and Supply (CIPS) said the purchasing managers index (PMI) for the construction sector slumped to 38.8 in June, its lowest ever, from 43.9 in May. CIPS said the June PMI points to the sharpest decline in output since the survey began in April 1997.

Meanwhile, the Organisation for Economic Cooperation and Development said unemployment is expected to start increasing this year after declining steadily in recent years. The declining trend in unemployment in recent years is projected to reverse in 2008, with the number of unemployed persons in the OECD area increasing by 1 million persons in 2008 and by nearly a further 2 million in 2009.

The organization said in its annual employment outlook that the unemployment will rise to 32.9 million this year and to 34.8 million next year from 31.9 million in 2007.

The unemployment rate is projected to edge up to 5.7 percent this year from 5.6 percent last year and then to rise to 6.0 percent in 2009, returning to its 2006 level.