Oil slump drags Asian stocks lower, Tokyo leads losses

[HONG KONG] Asian markets fell Monday as a relentless plunge in oil prices exerted downward pressure, while investors in Japan shrugged off Prime Minister Shinzo Abe's decisive re-election and focussed instead on the faltering economy.

Sydney shed 0.89 per cent as a hostage crisis erupted in the heart of the city, with terrified people cowering inside a cafe where an Islamic flag was displayed against a window, sparking a security lockdown in an area home to government and corporate headquarters.

In early trade Hong Kong lost 1.12 per cent, Shanghai slipped 1.14 per cent and Seoul was 0.66 per cent lower.

Tokyo dropped 1.31 per cent by noon after Abe's widely expected election win in a snap poll on Sunday that he had billed as a referendum on his economic policies.

"The elections are a net plus for the market, but really came as no surprise and thus are not likely to be a very large factor in today's trading," said Nomura Securities equity market strategist Junichi Wako.

"Analysts are essentially back to where they were before - hoping for a thorough fleshing out of Abe's plan to revitalise the economy," he told Dow Jones Newswires.

Investors were also focused on Bank of Japan's quarterly Tankan survey that showed confidence among major Japanese manufacturers edged down in the three months to December.

The slide in Asian markets comes after crashing oil prices dragged US stocks to one of their worst losses of the year on Friday.

The Dow Jones Industrial Average fell 1.79 per cent and the S&P 500 tumbled 1.62 per cent. It was the S&P 500's first weekly loss in nearly two months and its worst single-week decline - 3.5 per cent - since May 2012.

Oil prices sank to a fresh five-year low on Monday. US benchmark West Texas Intermediate for January delivery fell 25 cents to US$57.56 while Brent crude for January was down one cent to US$61.84 in mid-morning trade.

Lower oil prices benefit consumers, but traders have been unnerved by the speed of the free-fall in crude prices, which could put projects on hold in the oil sector and hurt energy companies and banks.

On forex markets the dollar was lower, buying 118.23 yen in early Monday trade against 118.79 yen in New York on Friday afternoon.

The euro fell to 147.30 yen from 148.05 yen and to US$1.2459 from US$1.2464 in US trade.

Gold was at US$1,217.01 an ounce compared with US$1,225.00 late Friday.

AFP