Asian markets swing as traders keep worried eye on inflation

Asian equity markets fluctuated Monday following a recent run-up, as investors struggled to keep up with another healthy showing on Wall Street with inflation continuing to weigh on sentiment.

While optimism about the global economic recovery remains intact, the rise in prices at rates not seen for decades has traders increasingly worried that central banks will have to tighten monetary policy quicker and more sharply than previously thought.

And data out of the United States last week showing consumer sentiment at a 10-year low indicated that the issue is being felt more in people's pockets, putting pressure on the Federal Reserve to step in.

However, for now officials are sticking to their view that the inflation spike will be temporary and peter out as supply chain problems are resolved.

National Australia Bank's Ray Attrill warned US President Joe Biden -- who is seeing his popularity taking a hit because of the issue -- could suffer.

"If consumer confidence, and (real) spending is seen to be suffering under the weight of six percent consumer price inflation, then it suddenly becomes a political problem for the White House, not just a headache for the Fed," he said in a note.

Still, Wall Street's three main indexes ended last week on a strong note, paring steep losses suffered on Tuesday and Wednesday in reaction to forecast-beating US inflation.

In early Asian trade, most markets were up but swung between gains and losses.

Tokyo enjoyed a strong showing after data showing the economy contracted more than forecast in the third quarter raised hopes the government will unveil a huge stimulus programme to stoke a recovery.

Hong Kong, Sydney, Seoul, Wellington and Taipei were all slightly higher but Shanghai, Singapore, Manila and Jakarta edged down.

There was little initial reaction to data showing Chinese retail sales grew far more than expected in October, with traders concerned about a slowdown in economic growth owing to lockdowns put in place to battle fresh virus outbreaks.

The weakness is giving the country's central bank a headache as it must try to nurture a recovery while at the same time try to keep a lid on inflation, which is sitting at levels not seen since the mid-1990s.

Meanwhile, traders will be keeping tabs on a virtual meeting between Biden and his Chinese counterpart Xi Jinping that is planned for Monday evening US time.

The virtual meeting of the presidents comes against a backdrop of rising tensions over several issues including Taiwan, trade, human rights and Hong Kong.

Trading on a new Chinese stock exchange focused on small and medium companies began in Beijing, with investors able to buy and sell more than 80 firms.

The move follows the 2019 launch of a Nasdaq-style board focused on science and technology listings on the Shanghai Stock Exchange.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: UP 0.5 percent at 29,754.61 (break)

Hong Kong - Hang Seng Index: UP 0.1 percent at 25,340.02

Shanghai - Composite: DOWN 0.1 percent at 3,534.76

Dollar/yen: UP at 113.87 yen from 113.85 yen at 2230 GMT on Friday

Pound/dollar: UP at $1.3433 from $1.3413

Euro/dollar: UP at $1.1457 from $1.1445

Euro/pound: DOWN at 85.29 pence from 85.33 pence

West Texas Intermediate: DOWN 0.6 percent at $80.34 per barrel

Brent North Sea crude: DOWN 0.7 percent at $81.62 per barrel

New York - Dow: UP 0.5 percent to 36,100.31 (close)

London - FTSE 100: DOWN 0.5 percent at 7,347.91 (close)