Asian stocks skid as crude fails to sustain bounce

Asian stock market and the dollar surrendered their gains Thursday as recently volatile crude oil prices seesawed lower, although European stocks were still expected to mark opening gains.

Financial spreadbetters predicted Britain’s FTSE 100 .FTSE to open up as much as 1.5 percent. Germany’s DAX .GDAXI was seen rising by as much as 1.1 percent, and France’s CAC 40 .FCHI was seen advancing by as much as 1.2 percent.

S&P500 e-mini futures ESc1 were down about 0.6 percent in late Asian trade. On Wall Street overnight, an uptick in U.S. crude oil from 2003 lows helped major indexes pull away from losses of more than 3 percent, but they still finished more than 1 percent lower.

The European Central Bank will take center stage with its regular policy meeting later in the session. Central bank policymakers are expected to hold interest rates steady but highlight increasing risks to growth and inflation, while keeping the door open for further easing measures later this year.

“With last month’s December disappointment still fresh in the memory, ECB President Mario Draghi will have to convince the markets that the ECB has a plan, and the ammunition to cope with the further slide in inflationary pressures that is likely to ripple across Europe in the coming weeks,” said Michael Hewson, chief market analyst at CMC Markets in London.

Crude oil succumbed to added pressure on prices and its losses continued on Thursday.

The new front-month U.S. March oil futures contract CLc1 was down 0.7 percent at $28.15 a barrel, giving up an earlier rise. Brent crude LCOc1 dropped 0.6 percent to $27.72 in Asian trade. [O/R]

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS erased early solid gains and teetered in and out of negative territory in afternoon trade. It was last down 0.5 percent.

Japan’s Nikkei average .N225 ended down 2.4 percent, adding to its 3.7 percent plunge in the previous session.

The Shanghai Composite Index .SSEC slipped 0.9 percent, while China’s bluechip CSI300 index .CSI300 was down 0.8 percent. It has lost around 15 percent since the beginning of the year.

David Dai, Shanghai-based investor director at Nanhai Fund Management Co, said fears of a prolonged bear market were, nevertheless, overdone.

“With stocks having fallen so much, much of the risk has been priced in and another free-fall is quite unlikely, although the chance of a sustainable rebound is slim,” he said.

The dollar index .DXY, which tracks the U.S. unit against a basket of six counterparts, was down about 0.1 percent at 99.013.

The dollar turned back toward a one-year low against its perceived safe-haven Japanese counterpart on Wednesday.

The greenback shed about 0.1 percent to 116.75 yen JPY= after falling to 115.97 on Wednesday, undermined by U.S. data.

U.S. consumer prices unexpectedly fell in December, suggesting inflation was more sluggish than the U.S. Federal Reserve believed.

Other Wednesday data showed a drop in housing starts and building permits last month, which led investors to pare expectations of further interest rate hikes this year.

The euro edged up about 0.1 percent to $1.0893, ahead of the ECB meeting later in the session.

Source: Reuters

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