Oil rout, Fed-ticipation hurts Asia stocks; China leads losses
Asian equities came under pressure on Tuesday from a renewed selloff in oil overnight, ahead of the Federal Reserve’s monetary policy decision on Thursday.
U.S. crude fell below $30 a barrel after sliding as much as 7 percent on Monday. Oversupply fears were to blame after Iraq’s oil ministry told Reuters on Monday that the country had record output in December, with certain fields producing as much as 4.13 million barrels a day. A senior Iraqi oil official said separately that the country may raise output even further this year.
Oil’s decline helped push U.S. stocks sharply lower Monday, with the S&P 500 and Nasdaq more than 1.5 percent lower and the Dow Jones Industrial Average off by almost 1.3 percent as investors awaited a swath of major earnings reports, data and the Federal Reserve’s policy statement later in the week. The U.S. central bank begins a two-day meeting on Tuesday local time, but no rate action is expected. Still, attention will fall on its post-meeting statement Wednesday local time for commentary on recent market volatility.
On the mainland, the Shanghai Composite and Shenzhen Composite widened losses to more than 3 percent each by afternoon trade, giving up all of Monday’s gains. Investors brushed off news that the People’s Bank of China conducted its biggest daily open markets operation in three years on Tuesday, injecting 360 billion yuan ahead of the Lunar New Year holiday.
Brokerages were among the top losers, with Everbright and Haitong declining between 3-4 percent.
Elsewhere in Greater China, Hong Kong’s Hang Seng Index slipped nearly 2 percent, with oil majors Sinopec and CNOOC tumbling 6 percent each.
Japan’s benchmark Nikkei index snapped a two-day winning streak, losing more than 2 percent.
Auto parts makers were in focus amid reports that auto parts makers are in the cross hairs of European regulators. Denso, Mitsubishi Electricand Hitachi closing down more than 3 percent each after Reuters reported they are set to be fined for allegedly fixing parts prices; the amount could come up to 10 percent of their global turnover.
McDonald’s Japan slid 2.5 percent on news the U.S. parent firm may be considering selling a portion of its stake in the Japan business.
Steel plays also weakened after data on Monday showed 2015 steel exports fell to a four-year low; Kobe Steel and JFE Holdings lost 6 and 5 percent, respectively.
In South Korea, the benchmark Kospi eased more than 1 percent after closing at a more than one-week high on Monday. Data released before the market open showed fourth-quarter gross domestic product more than halved, with growth rising a slower-than-expected 0.6 percent on quarter, from a 1.3 percent rise in the previous period.
“Overall for 2015, growth weakened to 2.6 percent from 3.3 percent in 2014 owing mainly to the MERS effect on private demand along with a sluggish external environment. Looking ahead, we expect a modest rebound in 2016 to 3.1-3.2 percent as G3 economies continue to recover. Meanwhile, being a major oil importer, Korea should benefit from soft oil prices above all,” said Mizuho economists in a morning note.
Hyundai Motor and LG Electronics fell 1 and 3.5 percent, respectively, ahead of reporting earnings later in the day.
Among emerging markets, Philippine shares tumbled more than 1 percent while the peso crashed to a six-year low.
Australian markets are shut for the Australia Day public holiday.
Source: CNBC – Oil rout, Fed-ticipation hurts Asia stocks; China leads losses
