Asia drops as weak oil widens growth worries, euro bullish

Asian stocks slipped on Thursday as weak oil prices continued to feed global growth worries, while the euro held solid gains after a policymaker poured cold water on market expectations of more easing by the European Central Bank.

European shares were poised to start lower, with financial spreadbetters expecting Britain’s FTSE 100 .FCHI to fall 0.4 percent, Germany’s DAX .GDAXI to open down 0.5 percent and France’s CAC40 .FCHI to begin the day off 0.6 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS shed 0.1 percent.

Japan’s Nikkei .N225 closed down 1.3 percent at a five-week low and Australian shares pared earlier declines to end the day 0.8 percent lower.

Chinese shares gave up early gains, with the CSI300 .CSI300 trading flat. Indonesian shares .JKSE also saw gains disappear, and was down 0.1 percent, while Korea’s Kospi .KS11 erased earlier losses to finish 0.2 percent higher.

Risk asset markets continued to take cues from crude oil. Brent crude LCOc1 edged up slightly to fetch $40.44 a barrel in Asia, but remains within reach of a 7-year low of $39.57 struck on Wednesday.

“The process of taking money off the table is likely to be driven by nervousness ahead of the U.S. Federal Reserve’s moves next week, along with the soft oil price being viewed as a barometer of future economic activity,” said Angus Gluskie, managing director of White Funds Management in Sydney.

In currencies, the euro slipped 0.2 percent to fetch $1.09995 EUR= after climbing to a one-month peak of $1.1044 overnight.

The common currency, already on a bullish footing after the ECB’s monetary easing last week fell well short of expectations, received a further boost after Governing Council member Ewald Nowotny suggested on Wednesday markets were expecting too much stimulus from the central bank.

A notable mover in Asia was the Australian dollar, which soared after the government reported Australian jobs surged by 71,400 in November, pushing the unemployment rate to a 19-month low of 5.8 percent. That followed strong gains in October, making this the strongest two-month total in 28 years.

“Two very, very strong back-to-back months and it’s very difficult to pin any drivers down because economic growth is still pretty soft,” said Tom Kennedy, an economist at JPMorgan.

Despite questions about the reliability of the data, the Aussie jumped 0.7 percent to $0.7281.

The New Zealand dollar also advanced after the Reserve Bank of New Zealand (RBNZ) cut interest rates early on Thursday but said further easing should not be needed.

The kiwi traded at $0.6728 NZD=D4 after gaining more than one percent in response to the central bank’s statement.

“Price action following the RBNZ announcement suggests that the bigger surprise was the watering down of the forward guidance and focus on upside risks as opposed to the rate cut,” wrote Todd Elmer, Citi’s Asian head of G10 FX strategy.

The Chinese yuan weakened after the central bank set the midpoint at a more than four-year low for a second day. That was seen as a sign Beijing is quietly permitting the currency to depreciate after it was included in the IMF’s reserve basket.

The People’s Bank of China set the midpoint rate CNY=SAEC at 6.4236 per dollar prior to market open, 0.1 percent weaker than the previous fix of 6.4140. The spot market CNY=CFXS opened at 6.4300 per dollar, its weakest since Aug. 12, and was changing hands at 6.4393, compared with the previous close of 6.4280.

The dollar fetched 121.635 yen JPY= after tumbling overnight to a 1-month low of 121.07 yen as the Japanese currency attracted safe haven bids amid the ongoing rout in commodities.

Tthe dollar index .DXY rose 0.2 percent to 97.512 but remained near the 1-month low of 97.223 struck overnight.

The U.S. currency was hurt as Treasury yields fell on a flight to the safety of government debt, prompted by falling oil prices and a decline on Wall Street.

The S&P 500 .SPX tracked weaker commodities and lost 0.8 percent on Wednesday, while the Dow .DJI lost 0.4 percent and the Nasdaq .IXIC shed 1.5 percent.

Highlighting the plight of the broader commodity markets, the Thomson Reuters Core Commodity CRB index .TRJCRB hit a fresh 13-year low on Wednesday.

Source: Reuters