Hong Kong (AFP) - Asian stocks made a positive start Wednesday following gains on Wall Street but lost momentum as factory gate prices in China fell for the first time in nearly two years.

Shares in Tokyo and Hong Kong rose at the open, with the United States bracing for a tense night of midterm election results.

But they dipped in mid-morning trade after official data showed the world’s second-largest economy languishing under Beijing’s strict zero-Covid policy.

Markets had climbed in New York and Europe on Tuesday as polls opened in crucial US elections that will shape the political fortunes of President Joe Biden.

Biden’s Democrats are facing a gargantuan struggle to hang onto control of Congress, and a Republican victory could pave the way for a White House comeback bid by Donald Trump.

Such a result could also lead to political deadlock in Washington – a prospect welcomed by investors “as it prevents any significant shifts in policy,” according to Scope Markets analyst James Hughes.

At the same time, market players are eying US inflation data due on Thursday, causing the dollar to retreat, said Edward Moya, senior market analyst at OANDA.

“The dollar got crushed today as a short-covering move accelerated as investors embraced risk appetite ahead of the midterm elections and Thursday’s pivotal inflation report,” he said in a note late Tuesday.

Tokyo was down 0.2 percent at the break, while Hong Kong lost 0.1 percent in morning trade, with Shanghai up 0.3 percent.

Other Asian markets were mostly higher, with Taipei up 1.4 percent, Seoul gaining 1.1 percent and Singapore up 0.3 percent. Sydney rose 0.6 percent while Jakarta was flat.

Speculation over how long Beijing will stick with its harsh lockdown-and-testing policies designed to stamp out Covid-19 has fuelled volatility in Chinese markets in recent days.

Official data showed Wednesday that China’s producer price index (PPI) fell by 1.3 percent on-year in October, pushing it into negative territory for the first time since December 2020.

The consumer price index (CPI) – the main gauge for retail inflation – rose by 2.1 percent on-year in October, moderating slightly from September’s two-year high of 2.8 percent.

Some stocks turned negative after “China inflation data printed a rather gloomy picture, with PPI remaining deflationary and CPI much weaker than expected, pointing to waning demand,” Stephen Innes of SPI Asset Management said in a note.

“Rolling lockdowns in China, as Covid cases rebound, are catching oil traders leaning the wrong way,” he added. Both main crude indexes were down more than 2.5 percent.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.2 percent at 27,827.16 (break)

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 16,539.83

Shanghai - Composite: UP 0.3 percent at 3,072.68

Pound/dollar: UP at $1.1544 from $1.1468 on Tuesday

Euro/dollar: UP at $1.0074 from $1.0005

Dollar/yen: DOWN at 145.465 yen from 146.26 yen

Euro/pound: UP at 87.28 pence from 87.23 pence

West Texas Intermediate: DOWN 3.3 percent at $88.79 per barrel

Brent North Sea crude: DOWN 2.6 percent at $95.32 per barrel

New York - Dow: UP 1.0 percent at 33,160.83 (close)

London - FTSE 100: UP 0.1 percent at 7,306.14 (close)