[TOKYO] Asian stocks were down across the board on Wednesday as crumbling oil prices and data pointing to cooling demand from China sapped investor appetite for risk assets.
MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.2 per cent and edged towards its November trough, a break of which would take it to its lowest level since early October.
Indicators this week highlighted the continuing struggle facing China's economy.
Soft trade numbers from China on Tuesday cemented concerns over cooling demand.
Data on Wednesday showed Chinese factories were plagued by persistent producer price deflation in another sign that Beijing's year-long easing efforts have yet to restore momentum to a fragile economy. On the other hand, China's consumer inflation did pick up slightly in November.
Japan's Nikkei shed 1.1 per cent to hit a three-week low, with a surprise jump in domestic machinery orders offering little support.
Volatile Shanghai shares weaved in and out of the red and were last up 0.4 per cent. Weak indicators often stir hopes of government stimulus, providing a burst of support for Chinese shares.
Australian stocks lost 0.2 per cent.
Overnight on Wall Street, the S&P 500 fell 0.7 per cent. The S&P energy sector has fallen 10.4 per cent since Dec. 1.
Opec's decision on Friday not to cut its production target has sparked concerns global oil producers will pump even more crude into an already oversupplied market.
Brent crude futures have fallen almost 30 per cent so far this year after a decline of nearly 50 per cent in 2014. "The fall is driven by likely increases in supply after the Opec meeting and as Iran will return to the market after a lift of sanctions. On the other hand, demand doesn't look strong as many economies face downside risk," said Shuji Shirota, head of macro economics strategy at HSBC Securities. "At the moment, it is hard to see where a bottom will be." Crude did get some temporary respite from Japan's robust machinery orders data, and Brent futures were last up 1.2 per cent at US$40.74 a barrel after falling to US$39.81 overnight, lowest since February 2009.
Showing the plight of the broader commodity markets, The Thomson Reuters Core Commodity CRB index on Tuesday hit its lowest since November 2002.
In addition to prospects of weaker demand from top consumer China, lower oil prices have hit countries that depend on revenues from oil and other resources. MSCI's gauge of emerging market shares fell to two-month lows.
On Tuesday, Brazilian shares edged near their six-year low touched earlier this year while stocks in Qatar fell 3.1 per cent to a two-year low.
Investors have another reason to be cautious on risk assets as the U.S. Federal Reserve is widely expected to raise interest rates for the first time in almost a decade next week.
The dollar soared against oil-linked currencies, touching an 11-year high against the Canadian dollar and a 13-year high versus the Norwegian crown on Tuesday, but its performance wasn't as stellar against other major rivals.
The euro traded at US$1.0911, adding to its 0.5 per cent gains on Tuesday, and edging back towards a one-month high of US$1.0981 hit on Thursday after the European Central Bank's stimulus turned out to be smaller than expected.
The dollar also edged back against the yen to 122.78 yen from this week's high of 123.48 yen, turning negative on the week.