Asian markets hurt as oil extends losses

HONG KONG: Oil prices fell further yesterday, heading to six-year lows, while crude’s weakness continues to test investor confidence, pushing the yen up and weighing on Asian equities.

The euro edged up against the dollar after diving Tuesday on comments from a key member of the European Central Bank that fanned expectations it will unveil a bond-buying scheme at its policy meeting next week.

On oil markets US benchmark West Texas Intermediate for February was down 58 cents at $45.31, a level not seen since March 2009, and Brent slipped 54 cents to $46.05, its lowest since April 2009.

Both contracts were hammered Tuesday after two members of Opec said the cartel could not prevent prices from plunging further, despite losing more than 50% since June.

Ministers from the United Arab Emirates and Kuwait also said prices could drop further unless there was a cut in booming shale oil output in the United States.

Analysts say richer cartel members -- such as the UAE and Saudi Arabia -- have been ready to accept falls in the hope they will force higher-cost shale producers out of the market.

The weak prices have hit buying sentiment for global equities, with the Dow, S&P 500 and Nasdaq all sinking in New York.

Tokyo tumbled 1.71%, or 291.75 points, to finish at 16,795.96, while Sydney sank 0.95%, or 51.1 points, to 5,353.6 and Seoul fell 0.18%, or 3.48 points, to 1,913.66.

Shanghai -- which surged more than 50% last year on hopes for government measures to boost the economy -- fell 0.40%, or 12.86 points, to end at 3,222.44, while Hong Kong slipped 0.43%, or 103.37 points, to 24,112.60.

On currency markets a flight to safer investments saw the yen advance.

The dollar was at 117.14 yen yesterday, down from 117.90 yen in New York and well off rates above 118 yen seen in Tokyo earlier Tuesday. The euro was at 138.35 yen compared with 138.84 yen in US trade.

Gold, meanwhile, was $1,229.54 an ounce, compared with $1,238.84 on Tuesday.

“The drop in oil prices is quite severe, so whenever there’s some weakness in oil we tend to see risk aversion,” Hiroichi Nishi, an equities manager at SMBC Nikko Securities Inc. in Tokyo, told Bloomberg News.

“It’s also heightening concerns of a negative influence on materials and infrastructure-related industries in the US, which would lower inflation and push out the timing of a possible interest-rate hike.”