Asia stocks sag on oil’s slide, dollar dips before Fed testimony
TOKYO (Reuters) — Asian stocks were mostly lower on Tuesday, with a sharp decline in crude oil prices weighing on energy shares, while the dollar dipped ahead of Federal Reserve chairman Jerome Powell’s first US congressional testimony.
Spreadbetters expected European stocks to open slightly higher, with Britain’s FTSE, Germany’s DAX and France’s CAC each gaining about 0.1 percent.
Overnight on Wall Street, the Dow edged up 0.2 percent but the S&P 500 lost 0.1 percent as energy shares were hit by the drop in oil that offset a jump in financials.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.3 percent lower following two sessions of gains.
Chinese shares extended losses after dropping the previous day on soft economic data. The Shanghai Composite Index fell 1.1 percent, as did Hong Kong’s Hang Seng.
Australian stocks fell 0.5 percent and South Korea’s KOSPI was flat. Japan’s Nikkei rose 0.8 percent, supported by exporters’ gains.
“Crude has been rising steadily so some kind of adjustment was due. From this context the impact on the broader economy, inflation and therefore the stock markets should be lim- ited,” said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo.
Crude prices slumped more than four percent on Monday, with Brent futures reaching a three-month low of $71.52 a barrel, as Libyan ports reopened and traders eyed potential supply increases by Russia and other producers.
Concerns over China’s second-quarter economic growth also weighed on oil prices. The country’s economy expanded at a slower pace as Beijing’s efforts to contain debt hurt activity, while June factory output growth weakened to a two-year low.
But Brent has gained about 7.5 percent in 2018, during which it poked above $80 a barrel in May to a 3-1/2-year high, as supply has been kept in check while a relatively strong global economy has supported demand.
“The stock markets have been quite steady recently, and this shows that investors are starting to look beyond the US midterm elections, which by then President (Donald) Trump’s posturing is expected to have peaked out,” said Monji of Daiwa SB Investments.
In currencies, the dollar index inched down 0.05 percent against a basket of six major currencies to 94.474 .