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Asia: Stocks extend global losses on oil price drop

Tuesday, May 24, 2016 - 17:04
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[TOKYO] Asian stock markets fell in thin trading on Tuesday, as oil prices deflated energy shares, while Singapore said it was kicking out a Swiss bank linked to Malaysia's 1MDB.

Investors were also eyeing the start of a Group of Seven summit in Japan on Thursday, as US President Barack Obama and other leaders from the club of rich nations meet for annual talks largely focused on the sputtering global economy.

Shares of oil-linked companies slumped as crude dipped for a second day after a pledge from Iranian officials to keep up production did little to dispel worries about global oversupply.

A stronger US dollar and progress in controlling wildfires in Canada's crude-producing Alberta province also helped to dampen prices.

US benchmark West Texas Intermediate for July delivery was down 30 cents at US$47.78 a barrel while Brent crude for July slipped 35 cents to US$48.00.

In Tokyo, Japanese energy explorer Inpex tumbled 1.82 per cent while refiner JX Holdings was down 0.4 percent.

In Hong Kong, Chinese energy giant CNOOC was nearly three per cent off in late afternoon trading and PetroChina slumped more than two per cent.

At the close, Tokyo's benchmark Nikkei 225 index was down 0.9 per cent as the stubbornly strong yen clouded the outlook for Japanese exporters' profits.

Shanghai finished 0.8 per cent lower, Seoul fell 0.9 per cent, and Sydney lost 0.4 per cent. Hong Kong's Hang Seng index was up 0.2 per cent in late afternoon trading.

Singapore was down 0.4 per cent. Also in the city state, the Monetary Authority of Singapore (MAS) said it had served Switzerland's BSI Bank - which has been linked to a global money-laundering scandal rocking Malaysia's state fund 1MDB - a notice of intention to withdraw its status as a merchant bank.

Singapore's central bank said it had also asked state prosecutors to investigate six senior executives of BSI Bank, including its former chief executive, for possible criminal offences.

It is the first time Singapore regulators have cancelled the licence of a merchant bank since 1984, the statement said.

Sentiment in Asia also took a hit from worries over a possible US interest rate hike by the Federal Reserve as early as next month, analysts said.

Adding to the US central bank's hawkish signals last week that a June rate raise could be on the cards, Fed board member James Bullard weighed in with comments in Beijing on Monday that suggested markets could be behind the curve on the Fed's intentions.

Since raising rates in December for the first time in nine years, the US central bank in March forecast essentially two rate rises for this year, but markets have had much lower expectations amid a batch of lacklustre US economic data.

"Markets remain fragile as talk of a US interest rate hike in June puts some fear on whether global growth will remain resilient," Niv Dagan, Melbourne-based executive director at Peak Asset Management, told Bloomberg News.

"The timing of future Fed rate hikes in the face of a sluggish economy is a major focus among stock investors who have benefited from historically low borrowing costs since the 2008 financial crisis."

Adding to fears of slowing global growth were figures on Monday showing Japan's exports faltered in April - after separate figures last week showed the world's number three economy dodged a recession in the first quarter.

On currency markets, the greenback sharply rose against most higher yielding, but riskier, emerging market currencies.

Against the Japanese currency, the dollar bought 109.40 yen, slightly up from New York but still well down from 109.84 yen in Tokyo earlier Monday.

In early European trade, London dropped 0.4 per cent while Frankfurt and Paris shed 0.4 per cent.

AFP