Asian stocks struggle to eke out gains as investors worry about surging oil prices

Asian stocks struggle to eke out gains as investors worry about surging oil prices

April 11 ,2011
By AssociatedPress

HONG KONG — Most Asian stock markets fell Monday as investors continued to worry about soaring oil prices and Japan’s struggle to recover from its worst-ever earthquake.

Japan’s Nikkei 225 stock average dipped 0.5 percent to 9,717.84 while South Korea’s Kospi edged down 0.3 percent to 2,121.49. Benchmarks in Taiwan, Singapore and India also fell while Hong Kong’s Hang Seng index was nearly flat at 24,397.44.

Australia’s S&P/ASX 200 was up 0.7 percent at 4,972.70 while mainland China’s Shanghai Composite Index rose 0.7 percent to 3,051.38.

Oil prices hovered at 30-month highs near $113 a barrel Monday in Asia as traders eyed a wobbly U.S. dollar and fresh Middle East tension.

“Oil prices are now at levels that have historically acted as a marked constraint on global output,” Daragh Maher, a foreign exchange strategist at Credit Agricole CIB, said in a research note.

Benchmark oil for May delivery slipped 11 cents to $112.68 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.49, or 2.3 percent, to settle at $112.79 on Friday and set new 30-month highs almost every day last week.

Oil-related stocks were benefiting from the rising prices. Sinopec, Asia’s largest refiner by capacity, was up 2.4 percent to $4.10 Hong Kong dollars while PetroChina, the country’s biggest oil and gas producer, jumped 4 percent.

Companies with big fuel bills, like airlines, were suffering. Korean Air Lines Co. Ltd. dropped 3.7 percent, Qantas Airways Ltd. fell 2.7 percent, and Cathay Pacific Airways Ltd. was down 0.9 percent.

Oil moved higher as the dollar plunged against other major currencies. Oil is traded in dollars and tends to rise when the greenback falls and makes crude cheaper for investors holding foreign currency.

Some analysts were warning investors to avoid shares in Japanese automakers, whose production was severely curtailed by power outages and supply chain disruptions following the March 11 earthquake and tsunami. The twin disasters decimated the country’s northeastern coast, causing $310 billion in damage, killing up to 25,000 people and setting off a radiation leak at a nuclear power plant that was still not under control.

“We have turned bearish on the auto sector,” Citigroup Global Markets said in a report. The company said that the full extent of damage to the industry “is being underestimated by the market ... and we would avoid the sector as things stand.”

Shares of Toyota Motor Corp., the world’s No. 1 automaker, tumbled 2.5 percent. Nissan Motor Corp. drooped 2.2 percent, and Honda Motor Corp., slid 1.9 percent.

Japanese shares also fell after a report showed that machinery orders fell 2.4 percent in February, before the devastating earthquake and tsunami struck. Orders had risen 4.2 percent in January.

Chinese shares rose after the country reported a small trade surplus of $140 million in March, up from a deficit of $7.3 billion the month before.

“Chinese trade balance figures came out above analysts’ forecasts and provided some support to the Shanghai Composite, which is currently the best performer in the region,” said Chris Weston, a research analyst at IG Markets.

Oil prices are a concern in China, but there’s “still much liquidity, which means the stock market can still go higher,” said Linus Yip, chief strategist at First Shanghai Securities.

In New York on Friday, stocks were weighed down by oil prices as well as the threat of a government shutdown. But that risk was averted after the market closed when lawmakers agreed to a last-minute deal to cut about $38 billion in federal spending.

The Dow Jones industrial average lost 0.2 percent to close at 12,380.05. The Standard & Poor’s 500 index slipped 0.4 percent to 1,328.17. The Nasdaq composite lost 0.6 percent to 2,780.42.
In currencies, the dollar slipped to 84.79 yen from 84.89 yen late Friday. The euro stood at $1.4460, up from $1.4435 late Friday, its strongest level since January 2010.