Asian Shares Slide; Frazzled by Fed, Falling Oil Prices

TOKYO (Reuters) —
A Chinese investor naps while monitoring stock prices at a brokerage house in Beijing, Friday, Dec. 4. (AP Photo/Mark Schiefelbein)
A Chinese investor naps while monitoring stock prices at a brokerage house in Beijing. (AP Photo/Mark Schiefelbein)

Asian shares and other riskier assets skidded on Tuesday, pressured by slumping crude oil prices and mixed messages from Federal Reserve policymakers on the outlook for U.S. interest rate rises.

Oil prices continued to drop after shedding more than 2 percent overnight, as investors doubted that oil producing countries would freeze output to address a global glut.

Brent lost 0.4 percent to $37.54 a barrel after losing 2.5 percent on Monday. U.S. crude lost nearly 3 percent overnight, and on Tuesday was down about 0.5 percent at $35.53.

European shares are seen falling, with spread-betters expecting Germany’s DAX to fall as much as 1.0 percent and Britain’s FTSE 0.5 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.3 percent. Japan’s Nikkei stock index dropped 2.4 percent to an eight-week closing low, as the perceived safe-haven yen rallied.

“Investors are concerned that Japanese companies are losing their ‘weak-yen appeal,'” said Kazuhiro Takahashi, equity strategist at Daiwa Securities.

“Many people are thinking it would be difficult for exporters to forecast on-year gains in their earnings for this fiscal year.”

Commodity-related and industrial shares helped drag down U.S. stock indexes overnight, and U.S. economic data suggested that economic growth remained sluggish in the first quarter.

New orders for manufactured goods dropped in February, as they have in 14 of the past 19 months, while business spending on capital goods was much weaker than initially believed.

That gave investors no reason to believe that the U.S. Federal Reserve would raise interest rates anytime soon, in line with the cautious tone Fed chair Janet Yellen sounded last week, which contrasted with more hawkish remarks from other Fed policymakers.

Boston Federal Reserve President Eric Rosengren was the latest to fly into the hawkish zone on Monday, calling it “surprising” that futures markets currently price in just one or even no rate hikes this year, which he said could prove “too pessimistic.”

“Rosengren is usually on the dovish side of the spectrum, highlighting how out of line Fed chair Yellen sounded last week compared to her colleagues,” Sean Callow, senior currency strategist at Westpac, said in a note.

Minneapolis Fed President Neel Kashkari said on Monday he is “comfortable” with the current stance of U.S. monetary policy, and expects “moderate” economic growth ahead.

By contrast, Bank of Japan Governor Haruhiko Kuroda on Tuesday stressed his readiness to expand monetary policy further, saying that market moves would be among key factors the central bank will look at in deciding when and how it will next expand stimulus. But his comments did little to stem the yen’s ascent.

The dollar shed about 0.5 percent to 110.84 yen. A slide below 110.67 yen would take the currency to its lowest since October 2014. The euro gave up about 0.4 percent to 126.33 yen.

Against the dollar, the euro stood little changed at $1.1380 , within sight of Thursday’s 5½-month peak of $1.1438.

The Australian dollar stood flat at $0.7611, after the Reserve Bank of Australia held interest rates steady, citing evidence of continued growth at home despite an unhelpful rise in the local dollar.

On the other hand, the Reserve Bank of India cut its main interest rate by 0.25 percentage point to 6.5 percent as expected, its first rate reduction since September.

The reaction in local markets has been so far limited, with the Indian rupee little changed at 66.175 per dollar to the dollar, just below a three-month high of 66.07 hit earlier on Tuesday.

The benchmark BSE share index were down 0.5 percent.

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