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Asian stocks sink on doubts about China, Japan recoveries

KUALA LUMPUR, Malaysia – Asian stock markets were dragged down Friday by doubts about the durability of recoveries in the region’s two biggest economies.

Japan released inflation figures Friday that gave a mixed signal about the effectiveness of Prime Minister Shinzo Abe’s economic revitalization strategy that aims to reverse two decades of stagnation and falling prices.

The consumer price index rose for a fourth straight month in September but much of the increase was due to the impact of higher costs for imported food and energy as the Japanese yen has weakened as a result of the monetary easing.

Investors are watching for signs on whether the “Abenomics” strategy can really fuel a lasting recovery from years of torpor, said Stan Shamu, market strategist with IG in Melbourne, Australia.

“There is continuing concern that Abenomics isn’t working. Japan is the main source of volatility, and is driving weakness in the markets,” he said.

On top of that, the Chinese central bank’s refusal to inject funds into money markets this week to curb frothy credit growth has sparked fears of a liquidity crunch, with bank-to-bank lending rates inching higher. That has dimmed the optimism that stemmed from a rebound in third quarter economic growth and an improvement in manufacturing for September.

Japan’s Nikkei 225 shed 1.9 per cent to 14,214.43 and Seoul’s Kospi slipped 1.1 per cent to 2,024.64. Hong Kong’s Hang Seng fell 0.5 per cent to 22,715.77 and China’s Shanghai Composite Index was off 1 per cent at 2,143.50.

Benchmarks in Taiwan, Jakarta, Malaysian and Singapore were also weaker.

Asian markets ignored strong corporate earnings that sparked a rebound on Wall Street.

The Dow Jones industrial average rose 95.88 points, or 0.6 per cent, to 15,509.21. The S&P 500 added 5.69 points, or 0.3 per cent, to 1,752.07, about two points below the record high of 1,754.67 it reached on Tuesday. The Nasdaq composite was up 21.89 points, or 0.6 per cent, to 3,928.96.

In energy trading, benchmark U.S. crude for December delivery was up 26 cents at $97.37 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 25 cents to $97.11 on Thursday.

The euro rose to $1.3814 from $1.3797 late Thursday. The dollar dropped to 97.20 yen from 97.38 yen.