HONG KONG (AFP) - The rally in Asia stocks fizzled out on Friday (Feb 19), as a renewed weakening in the price of oil dampened sentiment and safe haven assets such as the yen received a boost.
US crude fell below US$31 a barrel as traders digested news that American stockpiles rose to the highest in more than eight decades.
While turbulence in Asian markets has abated this week with losses earlier in the year being partially won back, investors remain on alert over the global glut in crude and China's economic outlook.
Since the start of the year, tumbling oil prices, concern about the slowdown in Asia's largest economy and a sell-off in bank stocks sent some global stocks into a bear market.
Markets had received welcome support earlier in the week when oil prices jumped Wednesday following a pact between top two producers Russia and Saudi Arabia to pursue a coordinated strategy to limit output.
"Sentiment on the oil market has been a key macro driver for stock-market sentiment recently," Ric Spooner, Sydney-based chief market analyst at CMC Markets, told Bloomberg News.
"Concerns about the potential for credit-market problems in the event of a lower-for-longer oil scenario are near the top of a fairly long list of macro factors worrying investors at the moment."
West Texas Intermediate slipped 0.9 per cent after rising in the past two days. Brent also fell 0.9 per cent.
Asia markets were also depressed on Friday by a fall on Wall Street on Thursday, with Tokyo plunging 2.23 per cent by the break on Friday as a stronger yen dented exporters.
Analysts noted a strengthening currency - up to 112.81 yen to the dollar from 113.24 yen Thursday in New York - could weigh on the profitability of Japanese exporters.
"The stronger yen will be a burden on Japanese markets," Hideyuki Ishiguro, a senior strategist at Okasan Securities, told Bloomberg News.
"Investors are concerned at the downside of earnings, especially for exporters, which may weigh down the markets.
"We're not in a place where we can buy. The yen may strengthen further versus the dollar."
The currency has climbed almost five per cent since the Bank of Japan surprised traders by imposing negative interest rates last month.
Singapore's Straits Times Index was down 0.4 per cent at 2,647.00 as of 12:11 pm.
Elsewhere in Asia-Pacific, Hong Kong eased 0.57 per cent, while Sydney dropped 0.66 per cent and Seoul fell 0.4 per cent.
Energy firms fell slightly in Asia, with Sydney-listed Woodside Petroleum down 0.74 per cent while CNOOC was 0.15 per cent lower in Hong Kong and PetroChina lost 0.15 per cent.
In Shanghai stocks were flat, easing 0.05 per cent percent amid persistent worries over the flagging economy, dealers said.
People's Bank of China governor Zhou Xiaochuan was due to speak at a forum in Beijing later on Friday as the Chinese authorities renew efforts to build confidence before global policy makers arrive for the Group of 20 meetings in Shanghai next week.
Uncertainty about China's slowdown has added to bearish sentiment in financial markets this year as Beijing has sent mixed signals about managing the currency and stock markets.
"Since last summer's stock market debacle, the market's confidence in Chinese leaders' ability to govern their economy has been badly shaken and it has yet to be repaired," said Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies in Washington, according to Bloomberg.
"The longer this situation lasts, the greater potential damage the unpredictability about China´s economic situation could have on global markets."