China's surprise interest rate rise weighed down Asian stocks on Friday as investors sold shares of miners, shippers and other firms whose fortunes have been closely linked to the country's rapid growth. In Australia, BHP Billiton , the world's biggest miner, dropped 3.42 percent, while rival Rio Tinto fell 2.02 percent. "Yes, China is sending signals that it wants to slow demand, and that takes the edge off commodity speculation. But serious miners with long term contracts are up to their eyeballs in activity," said Colonial First State Fund Managers head of investment research Hans Kunnen.
Investors had extra reason for caution before a report later on Friday on third-quarter U.S. gross domestic product, with estimates varying widely. But analysts said investors held off selling aggressively on the rate rise because they were encouraged by some strong corporate earnings reports and lower crude oil prices. Oil prices slid nearer $50 a barrel in Asian trade and the U.S. dollar edged back toward six-month lows against the yen, reversing a short-lived rally on the China news as attention returned to worries about the U.S. economy. The Nikkei stock average <.N225> ended morning trade down 0.94 percent at 10,750.89. An MSCI index of Asia-Pacific shares outside Japan <.MSCIAPJ> edged down 0.28 percent. Its metals <.MSCIAPJMT> component fell 2.28 percent.
COPPER RECOVERS
Benchmark December copper recovered 0.5 percent to $1.26 a lb in Asia after sinking 2.7 percent in U.S. trade on fears China might lessen its demand for the metal. China's Shanghai composite stock index <.SSEC> was down 1.29 percent, paring an initial fall of almost 3 percent. While economists debated the long-term implications of China's move, investors decided it could have a negative effect on the soaring earnings of some companies supplying raw materials to feed China's voracious appetite. For the first time in nearly a decade, China's central bank on Thursday raised the benchmark rate on one-year yuan loans to 5.58 percent from 5.31 percent and the rate on one-year deposits to 2.25 percent from 1.98 percent. The move was seen as an attempt to guide a booming economy onto a slower growth path. China's economy has slowed for several quarters in a row but still logged a rapid 9.1 percent growth in the third quarter.
Even companies with strong earnings were not immune from selling. Nippon Steel Corp. <5401.T> fell 2.34 percent on the rate rise despite reporting a half-year profit that beat its own projection and further raising its full-year target. On a day heavy with earnings reports, investors also avoided stocks with poor outlooks. Shares of NEC Corp. <6701.T>, the largest cellphone supplier in Japan, dropped 3.93 percent after lowering its full-year operating profit outlook by 32 percent.////