Shares Fall as Oil Prices Sink After Output Accord Fails

Major Asian stock benchmarks sank Monday after an effort by major oil producing nations to agree on production cuts failed over the weekend.

Japan’s Nikkei 225 stock index led the decline, dropping 3.3 percent to 16,286.02 as a rising yen and quake-related production halts added to investor worries. Hong Kong’s Hang Seng index lost 1.3 percent to 21,032.89 and the Shanghai Composite Index in mainland China shed 1.5 percent to 3,031.00. South Korea’s Kospi retreated 0.3 percent to 2,008.28, while Australia’s S&P/ASX 200 dipped 0.3 percent to 5,143.70. Taiwan’s benchmark also fell while indexes in Southeast Asia were mixed.

Oil prices rebounded slightly by midday in Asia after falling by nearly 7 percent after Iran stayed away from a weekend meeting in Qatar of 18 oil producing nations that had been expected to reach an accord on freezing production to support crude oil prices.

“Expectations for the talks to end with an agreement were high, and the lack of one damaged the credibility of future meetings to support the oil market,” Bernard Aw of IG said in a commentary.

“Asia is set for a negative start to the week, given this development. Commodities are expected to be beaten back today, and this would have consequences for equities, especially energy and material counters,” he said.

U.S. crude oil fell $1.89 to $38.47 a barrel in electronic trading on the New York Mercantile Exchange, down 4.7 percent. It sank to a low of $37.61 a barrel, down 6.8 percent before regaining some of that loss.

Brent crude oil, which is used to price international crude oil, fell $1.81 to $41.29 a barrel early Monday, down 4.2 percent. It tumbled 7 percent in earlier trading.

Oil-related stocks fell sharply, with China’s offshore oil and gas producer CNOOC and refiner Sinopec both down about 3 percent in Hong Kong while commodity shares such as Australian mining giant BHP Billiton lost 3.2 percent.

The slide in oil prices also dragged down currencies of resource-dependent countries. The Australian dollar fell 0.7 percent to 76.7 cents while the dollar rose 0.9 percent to 3.94 Malaysian ringgit.

“The collapse of the oil production freeze summit has caused a wave of selling across the commodity block currencies at today’s open,” Stephen Innes, senior trader at OANDA, said in a note to clients. “Traders will be closely monitoring oil prices and the knock-on effect on global equity markets. All of which should increase volatility and keep traders on the edge of their seats for most of the (Asia-Pacific) session.”

Oil prices hit a 12-year low in January, dipping under $30 a barrel, but had risen above $40 in recent days, buoyed by bullish talks surrounding the Doha meeting.

While the deal’s collapse sets a downbeat tone for the start of the trading week, investors will remain cautious as they await other news trickling out over the next few days for hints on the global economy’s health, including quarterly earnings, U.S. housing data and a European Central Bank meeting.

“People are just sitting on the sidelines still,” said Andrew Sullivan of Haitong Securities. “People are very wary of what they’re going to do with their money.”

Investor sentiment in Japan was also pressured as the yen hovered near its strongest level in 18 months crimping the outlook for the country’s exporters.

The dollar slipped 0.8 percent to 107.91 yen from 108.81. The euro was flat at $1.1282.

Major U.S. stock benchmarks ended Friday with small losses but were up for the week. The Dow Jones industrial average fell 0.2 percent to 17,897.46, the Standard & Poor’s 500 index lost 0.1 percent to 2,080.73 and the Nasdaq composite index dipped 0.2 percent to 4,938.22.