Asian Stocks Sink as Oil Slips While Yen Gains After Vote

Tokyo (Dec 15)  Asian stocks dropped, extending a selloff in global shares as crude oil extended declines. The yen climbed after Prime Minister Shinzo Abe secured victory in Japan’s elections, while Australia’s dollar retreated.

The MSCI Asia Pacific Index sank 0.7 percent by 9:17 a.m. in Tokyo, set for its lowest close since Oct. 21. Japan’s Topix index slid 1.4 percent as the yen jumped, gaining 0.6 percent versus the dollar and the euro. The Aussie slipped 0.2 percent as mining stocks drove a 1.1 percent drop in Sydney’s S&P/ASX 200 Index. (AS51) West Texas Intermediate oil sank 2.4 percent to $56.37 a barrel, dropping for a fourth straight day. Standard & Poor’s 500 Index futures were little changed after a slump Dec. 12 sealed the U.S. gauge’s first weekly drop since mid October.

Oil prices have tumbled by more than $40 a barrel this year as U.S. shale output contributes to a global glut amid forecasts for a drop in demand. WTI extending losses below $58 ignited a selloff in U.S. equities Dec. 12, with the Dow Jones Industrial Average (INDU) erasing 100 points in the last hour of trading. In Japan, Abe’s ruling bloc won more than two-thirds of the seats in the lower house, while the Tankan survey of confidence among manufacturers unexpectedly dropped this quarter.

“For weeks, policy makers of net oil-importing countries have been rejoicing at the effective income tax cut for consumers from a fall in oil,” Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand Ltd., wrote in a client note today. “Investors now appear concerned that the failure of oil prices to find a bottom is a symptom of chronically weak global demand.”

Aussie Slips

The Kospi index dropped 0.6 percent in Seoul, while the NZX 50 Index in was down 0.9 percent in Wellington. The MSCI All-Country World Index fell 3.8 percent last week, the most since 2012, as more than $2 trillion was erased from the value of global equities, according to data compiled by Bloomberg.

Oil in New York has slumped more than 46 percent since reaching a 2014 high in June as the U.S. ramps up production from shale oil amid slowing global demand for the commodity. While the American economy has recovered enough for the Federal Reserve to mull raising interest rates, Japan and Europe are striving to fend off deflation and China is headed for its slowest annual growth since 1990. The Fed reviews monetary policy this week.

OPEC -- which last month resisted calls to cut output amid the rout in oil prices -- will stand by its decision even if crude sinks to as low as $40 a barrel, United Arab Emirates Energy Minister Suhail Al-Mazrouei said. Venezuela supports holding an emergency meeting of the Organization of Petroleum Exporting Countries but hasn’t officially requested one, an official at the country’s foreign ministry said Dec. 12.

The Aussie dropped to 82.25 U.S. cents and sank 1 percent against the yen. Treasurer Joe Hockey said yesterday that the country’s budget deficit is deepening because of the biggest slump in the terms of trade since record-keeping began more than 50 years ago.

A group of people has been taken hostage in a cafe in Sydney’s Martin Place, in the central business district. A black flag with Arabic writing was placed in a window, Australian TV channels reported.

Source: Bloomberg