Pressure mounted on mining shares that had been buoyant in recent days after China raised its interest rates for the second time in just over a month. The move had been expected for a while as the Asian Tiger is trying to dampen down rising inflation.

The annual rate slowed to 4.6 percent in December but it believed to rise further as the cost of food and commodities continues to increase. The People's Bank of China has lifted its benchmark rates in response and one-year deposit rates have gone up by 25 basis points to 3 percent and one year lending rates up by the same amount to 6.06 percent.

Kathleen Brooks, research director at Forex.com said, “This is not a shock to the market. Interest rates need to rise to effectively slow the Chinese economy and make it worth while for savers to keep their money in the bank rather than invest it in China's overheating property sector. Rates are still at a low level even after this hike, and more will be necessary in the coming months.

The move has impacted asset markets, the Aussie dollar has fallen due to its proximity to China and reliance on Chinese growth to fuel its exports sector. Stocks are relatively unchanged. We believe it will be difficult for them to muster much bullish sentiment today, as it shows that the Chinese authorities are committed to keeping a lid on inflation. However, they are embarking on a very slow, steady hiking cycle and its worth pointing out that real interest rates in China are still negative.”

The move has had a negative impact on metal and oil prices on fears that it could slow down the Chinese economy and hit demand for commodities.