Asia markets hurt as oil extends losses, yen rises

[HONG KONG] Oil prices fell further on Wednesday, heading to six-year lows, while crude's weakness continues to test investor confidence, pushing the yen up and weighing on Asian equities.

The euro edged up against the dollar after diving Tuesday on comments from a key member of the European Central Bank that fanned expectations it will unveil a bond-buying scheme at its policy meeting next week.

On oil markets US benchmark West Texas Intermediate for February was down 58 cents at US$45.31, a level not seen since March 2009, and Brent slipped 54 cents to US$46.05, its lowest since April 2009.

Both contracts were hammered Tuesday after two members of OPEC said the cartel could not prevent prices from plunging further, despite losing more than 50 per cent since June.

Ministers from the United Arab Emirates and Kuwait also said prices could drop further unless there was a cut in booming shale oil output in the United States.

Analysts say richer cartel members - such as the UAE and Saudi Arabia - have been ready to accept falls in the hope they will force higher-cost shale producers out of the market.

The weak prices have hit buying sentiment for global equities, with the Dow, S&P 500 and Nasdaq all sinking in New York.

Tokyo tumbled 1.71 per cent, or 291.75 points, to finish at 16,795.96, while Sydney sank 0.95 per cent, or 51.1 points, to 5,353.6 and Seoul fell 0.18 per cent, or 3.48 points, to 1,913.66.

Shanghai - which surged more than 50 per cent last year on hopes for government measures to boost the economy - fell 0.40 per cent, or 12.86 points, to end at 3,222.44, while Hong Kong slipped 0.43 per cent, or 103.37 points, to 24.112.60.

On currency markets a flight to safer investments saw the yen advance.

The dollar was at 117.14 yen on Wednesday, down from 117.90 yen in New York and well off rates above 118 yen seen in Tokyo earlier Tuesday. The euro was at 138.35 yen compared with 138.84 yen in US trade.

"The drop in oil prices is quite severe, so whenever there's some weakness in oil we tend to see risk aversion," Hiroichi Nishi, an equities manager at SMBC Nikko Securities Inc. in Tokyo, told Bloomberg News.

"It's also heightening concerns of a negative influence on materials and infrastructure-related industries in the US, which would lower inflation and push out the timing of a possible interest-rate hike." The euro edged up against the dollar, buying US$1.1800 against US$1.1777 in US trade.

The single currency took a hit on Tuesday after Ewald Nowotny, a governor of the Austrian central bank and a member of the ECB governing council, highlighted the need for policy makers to tackle the threat of deflation.

"It is important that one takes deflation risks seriously and addresses them," Mr Nowotny said, according to Bloomberg News, adding that the bank was weighing several stimulus measures.

"We shouldn't wait too long with a reaction." Analysts said the remarks were a sign the ECB may act when it meets on January 22, in part because Nowotny is not known for being particularly interventionist.

ECB President Mario Draghi warned, however, that the central bank does not have many options left if it wants to ease monetary conditions in the single currency area still further to ward off deflation.

Gold, meanwhile, was US$1,228.48 an ounce, compared with US$1,238.84 on Tuesday.

In other markets: - Mumbai fell 0.29 per cent, or 78.91 points, to end at 27,346.82 points.

Sesa Sterlite slid 7.63 per cent to 188.85 rupees, while Hindustan Unilever gained 4.21 per cent to 921.95 rupees.

- Bangkok fell 0.76 per cent, or 11.73 points, to 1,523.24.

Pruksa Real Estate slipped 4.00 per cent to 30.00 baht, while Bangchak Petroleum dropped 2.31 per cent to 31.75 baht.

- Malaysia's main stock index dropped 0.39 per cent, or 6.89 points, to end at 1,742.01.

AMMB Holdings shed 0.62 per cent to close at RM6.41 while Malayan Banking lost 2.67 per cent to 8.39. British American Tobacco went up by 4.13 per cent to RM67.50.

- Jakarta closed down 1.05 per cent, or 54.69 points, at 5,159.67.

Bank Permata rose 0.66 per cent to 1,520 rupiah while palm oil producer Astra Agro Lestari fell 3.86 per cent to 24,900 rupiah.

- Singapore closed down 0.45 per cent, or 14.91 points, at 3,326.16.

OCBC Bank fell 1.53 per cent to S$10.28 while Oil rig maker Keppel Corp closed down 0.86 per cent to S$8.10.

- Taipei shed 0.56 per cent, or 51.57 points, to 9180.23.

Taiwan Semiconductor Manufacturing Co. fell 1.89 per cent to NT$130.0 while smartphone maker HTC rose 1.02 per cent to NT$149.0.

- Wellington added 0.21 per cent, or 12.02 points, to 5,648.63.

Genesis Energy was up 1.44 per cent at NZ$2.12 and Air New Zealand was flat on NZ$2.62.

- Manila surged 1.24 per cent, or 91.88 points, to 7,490.88.

Universal Robina added 1.88 per cent to 200.40 pesos and SM Investments advanced 2.64 per cent to 873.50 pesos, while Ayala Land ended 2.05 per cent higher at 34.85 pesos.

AFP