Asia: Stocks fall as oil drops, investors weigh higher US rates

[SINGAPORE] Asian stocks dropped for a second day as oil tumbled below US$40 a barrel and investors weighed the direction of US monetary policy.

The MSCI Asia Pacific Index fell 0.5 per cent to 128.10 as of 9:08 am in Tokyo, heading for the lowest close in a week. US shares retreated on Wednesday as Federal Reserve Bank of St Louis President James Bullard joined a chorus of US policy makers floating the prospect of an interest-rate hike as soon as April should the economic data warrant it.

"Fed officials this week reminded the market that they still want to move forward with the rate hikes," Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about US$7.2 billion, said by phone.

"Investors have been looking for a reason to pull back and this is one. Not surprising given the strong rebound that we've seen. Concerns remain about how sharp the slowdown is in China. You still have deflationary pressures and geopolitical risks."

After halving its projection for rate increases this year to two - a shift that spurred global stock gains and weighed on the US dollar - the Fed is back in the spotlight as its own officials start to tweak that rhetoric. China's central bank chief is due to speak Thursday as traders in some parts of Asia wind down ahead of the Easter holiday.

Regional Gauges Japan's Topix index slipped 0.6 per cent.

South Korea's Kospi index dropped 0.3 per cent. Australia's S&P/ASX 200 Index lost 1.1 per cent. New Zealand's S&P/NZX 50 Index declined 0.1 per cent. Markets in China and Hong Kong have yet to start trading.

The FTSE China A50 Index futures dropped 0.3 per cent in their most recent trading, while those for the Hang Seng Index declined 0.9 per cent. The Shanghai Composite Index jumped 0.4 per cent on Wednesday as technology shares rose and a revival in margin lending underpinned demand for riskier shares. The small- cap ChiNext index has advanced 20 per cent from a February low, the threshold for a bull market.

E-mini futures on the Standard & Poor's 500 Index decreased 0.1 per cent on Thursday. The US equity benchmark index slipped 0.6 per cent on Wednesday as energy producers declined amid the dollar's longest rally in a month.

West Texas Intermediate crude declined 4 per cent on Wednesday, the most in six weeks, as the dollar gained and a government report showed rising oil stockpiles kept supplies at the highest level in more than eight decades. The oil contract for May delivery fell as much as 0.6 per cent on Thursday.

BLOOMBERG