S.

Korea's consumer price inflation stays at zero level for 10 months

SEOUL, Oct. 2 (Xinhua) -- South Korea's consumer price inflation stayed at a zero level for 10
straight months due mainly to supply-side downward pressures such as cheaper crude oil and
lower farm goods prices, a government report showed Friday.

Consumer prices rose 0.6 percent in September from a year earlier, staying below 1 percent since
December 2014, according to Statistics Korea.

The low headline inflation came on the back of supply-side downward pressures such as low
prices in farm goods and crude oil.

Worries remained that the economy may fall into deflation, or the continued fall in goods and
service prices, but solid demand- side inflationary pressures were not expected to realize the
price fall risks.

Core consumer prices, excluding volatile agricultural and oil products, advanced 2.1 percent in
September from a year earlier, hovering above 2 percent for nine months in a row.

The OECD-method core consumer prices, which exclude food and energy, gained 2.5 percent
last month, keeping the 2-percent increase for the ninth consecutive month.

Amidst the low headline inflation, expectations lingered that Bank of Korea (BOK) may cut
interest rates further to stimulate the lackluster economy. The BOK lowered its policy rate by 25
basis points in March and June each to an all-time low of 1.5 percent.

The country's exports declined for nine straight months through September despite signs of
recovery in domestic demand from the Middle East Respiratory Syndrome (MERS) outbreak.
Some market watchers predicted the BOK's rate cut during the fourth quarter.

The livelihood prices, which reflect daily necessities, inched down 0.2 percent in September
from a year ago, but the fresh food prices, which gauge fruits and vegetables, went up 0.7
percent last month.

Stocks Rally With Crude Before Payrolls as

China Nerves Subside
European stocks rose, erasing a weekly decline, with U.S. equity-index futures and oil also
higher before a U.S. jobs report that may provide clues as to the timing of the Federal Reserve’s
first interest-rate increase in nine years.

“It’s all down to the global economy and whether the U.S. is sturdy enough to hold its ground
against a rate hike,” said Richard Hunter, head of equities at Hargreaves Lansdown Plc in
London. “Everyone is wondering whether the Fed will really keep to its word and act this year.
There will be even more emphasis on today’s non-farm payrolls number.”

Stocks

European stocks were underpinned after European Central Bank President Mario Draghi said
growth is returning in the region. Deutsche Lufthansa AG gained 4.4 percent after HSBC
Holdings Plc recommended buying the stock, citing strong demand and low fuel costs. RWE AG
and E.ON SE advanced more than 4 percent after German vice chancellor Sigmar Gabriel said
the nation will weigh support for nuclear liabilities.

Currencies

Currencies from commodity-exporting nations led gains as oil climbed. The Canadian dollar
added 0.2 percent, extending its weekly gain to 0.8 percent, the most since June. The New
Zealand dollar advanced 0.3 percent, while the Mexican Peso rose 0.2 percent.

The euro weakened alongside the yen as investors turned away from haven currencies. The 19-
member currency headed for a third weekly decline versus the dollar, its longest losing streak
since March.

“The payrolls report is not going to significantly change market expectations for tightening,”
said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.
“European equity markets are rebounding this morning so we’ve tentative improvement in risk
sentiment and it’s removing support for the euro.”

Emerging Markets

The measure of Chinese companies listed in Hong Kong, which recorded the biggest third-
quarter slump of any major global index except its Shanghai counterpart, jumped 3 percent.
China is rolling out tried and tested stimulus measures -- easing mortgage requirements and
promoting purchases of cars -- as it seeks to meet this year’s growth targets.

“China is likely to roll out new policies in the fourth quarter,” said Hao Hong, chief China
strategist at Bocom International Holdings Co. in Hong Kong. “We are looking for more fiscal
stimulus, such as favorable tax treatment and industry-specific policies on property, auto, new
energy and environmental protection.”