HONG KONG: Asian markets struggled Monday as inflation concerns returned to the fore, with commodity prices rallying and central banks preparing to roll back their ultra-loose monetary policies.
Adding to the grey mood was data showing growth in China's economy, the world's second-biggest, slowed further in the third quarter, hit by a property-sector crisis and a looming energy crunch.
The losses follow a healthy run-up last week across the world fuelled by a strong start to the earnings season, which helped distract from surging prices.
However, a further rise in the oil market -- WTI is at a seven-year high and Brent is at a three-year peak -- has refocused attention on the threat of inflation.
Data last week showed Chinese factory-gate costs at their highest in a quarter of a century in September, while US wholesale inflation hit a record. And on Monday, New Zealand said prices rose at their quickest rate in a decade.
That has increased pressure on central banks around the world to tighten the easy money policies put in place at the start of the Covid-19 pandemic, which have been key to a strong economic and equity market recovery.
Some banks -- including in South Korea and New Zealand -- have already hiked borrowing costs while the Bank of England has indicated it is close.
Meanwhile, the US Federal Reserve is expected to begin paring its bond-buying programme before the end of the year, and some observers are suggesting it could lift interest rates possibly before 2023.
The prospect of higher rates and less cheap cash has weighed on sentiment for several months and reassurances that inflation would only be temporary have been overtaken by the surging energy costs caused by reopenings around the world and a recovery in demand.
The lifting of travel restrictions into the United States from next month will likely add further upward pressure to prices.
"How risk markets respond to the bringing forward of rate hike expectations will be key to watch this week, as will anecdotes from the profit reporting season to see how firms are dealing with higher input costs and to what extent they are able to pass this onto consumers," said National Australia Bank's Tapas Strickland.
Bitcoin close to record high
Tokyo, Hong Kong, Shanghai, Singapore, Seoul, Wellington and Taipei fell but there were gains in Sydney, Manila, Mumbai, Bangkok and Jakarta.
London, Paris and Frankfurt all fell soon after opening.
China on Monday said growth eased to 4.9 percent in July-September, slightly slower than forecasts, as a crackdown on the real estate sector dealt a severe blow to a crucial part of the economy.
That has come at the same time as a worsening energy crunch across the country -- partly caused by government emissions targets -- that has forced some businesses to scale back activity.
"It's not hard to understand why (the data) has disappointed with the various port disruptions seen throughout the quarter due to covid restrictions, supply chain issues, as well as surging power costs and enforced shutdowns of the Chinese economy," said Michael Hewson of CMC markets.
"The performance of the economy hasn't been helped by the various crackdowns by Chinese authorities on various parts of the economy, as well as the problems around Evergrande and the property sector."
Still, there was some joy for investors in comments at the weekend from the People's Bank of China, with top officials saying the risk of spillover from embattled property giant Evergrande to the financial sector was "controllable".
Bitcoin rose above $62,500 as it homed in on its record high, with optimism that the Securities and Exchange Commission will allow the first US exchange-traded fund for cryptocurrency futures to begin operating this week.
The digital currency hit its all-time high of $64,870 in April before plunging on Chinese regulatory concerns.
Key figures around 0720 GMT
Tokyo - Nikkei 225: DOWN 0.2 percent at 29,025.46 (close)
Hong Kong - Hang Seng Index: DOWN 0.4 percent at 25,216.79
Shanghai - Composite: DOWN 0.1 percent at 3,568.14 (close)
London - FTSE 100: DOWN 0.2 percent at 7,220.29
Dollar/yen: UP at 114.36 yen from 114.28 yen at 2040 GMT on Friday
Pound/dollar: DOWN at $1.3738 from $1.3743
Euro/dollar: DOWN at $1.1577 from $1.1605
Euro/pound: DOWN at 84.28 pence from 84.42 pence
West Texas Intermediate: UP 1.2 percent at $83.27 per barrel
Brent North Sea crude: UP 0.8 percent at $85.56 per barrel
New York - Dow: UP 1.1 percent at 35,294.76 (close)