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December, 6, 2016

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Asian stocks drop as markets eye central banks

LONDON/HONG KONG -- Most Asian markets fell Monday following healthy gains at the end of last week, with investors betting the Federal Reserve will hike interest rates before the end of the year.

Shares soared Friday after data showed a first rise in Chinese factory prices for more than four years, fueling hopes the world's number two economy is reaching the end of a years-long growth slowdown.

Analysts said comments from Fed boss Janet Yellen Friday suggested the U.S. central bank will lift borrowing costs but at a steady pace.

Yellen said there were plausible ways that running a "high-pressure economy" could help it overcome the damage caused by the global financial crisis.

"If nothing else, this is another lower-for-longer prescription. However, these comments do not preclude a 25-basis-point rate hike this year as another step in the normalization process," Thomas Simons, senior economist at Jefferies LLC in New York, wrote in a note to clients.

Most experts predict a hike by December at the latest and are keeping a close eye on the release this week of U.S. industrial output and inflation data.

The prospect of higher borrowing costs weighed on Asian markets.

Hong Kong fell 1 percent and Sydney was 0.5 percent lower, while Seoul shed 0.2 percent, Singapore slipped 0.7 percent and Wellington sank 1.1 percent. But Tokyo was 0.2 percent up by the break and Shanghai added 0.1 percent.

Market-watchers are keeping a close eye on Bangkok's market, which soared Friday as news of the death of Thailand's king fuelled bargain-buying after heavy selling in his final days.

The dollar strengthened Friday on the prospects of higher rates and maintained its gains in early Asian trade.

The greenback bought 104.18 yen in Tokyo, from 104.16 yen in New York and well up from the 103.66 yen Thursday. The euro and pound also retreated.

In Sydney, Crown Resorts plunged more than 10 percent on news that 18 sales and marketing staff had been held in China, including an executive in charge of luring high-rollers to Australia.

In European Trade

Most markets in Europe also swung mostly lower, with attention fixed on central bank policy before an ECB meeting this week and speculation on the outlook for U.S. borrowing costs.

Meanwhile, European Central Bank chief Mario Draghi will be under pressure this week to clarify the bank's stimulus plans after investors were spooked by talk of an end to its massive bond-buying program.

Eurozone official data released Monday showed inflation across the bloc rising to 0.4 percent in September year-on-year, unchanged from a prior estimate.

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