Asian stocks set to fall amid rout in crude oil price

Pedestrians walking past a share prices board of the Tokyo Stock Exchange in Tokyo, Japan, on Dec 1, 2015.
Pedestrians walking past a share prices board of the Tokyo Stock Exchange in Tokyo, Japan, on Dec 1, 2015.PHOTO: AFP

WELLINGTON (BLOOMBERG) - Most Asian index futures signalled losses following crude oil's slump below US$40 (S$56.50) a barrel, while the euro lingered near a seven-month low, with European policymakers expected to expand economic stimulus on Thursday (Dec 3) amid lacklustre inflation.

Futures on benchmarks in Japan and South Korea dropped, while Australian and New Zealand shares opened lower following a energy-led slump in American indexes.

US oil traded at US$40.13 in early Thursday trading after slumping to US$39.94 in the previous session amid signs of discord between members before Friday's Opec meeting in Vienna.

The euro held on to its losses ahead of the European Central Bank meeting, after comments from Federal Reserve chair Janet Yellen on the US economy bolstered the dollar.

The ECB is expected to cut its deposit rate and further expand asset purchases at its meeting on Thursday, kicking off a crucial 48-hour period for global markets. Ms Yellen will speak before the US Congress and November payrolls data is due on Friday, probably the most-anticipated piece of American data to land ahead of the Fed's Dec 16 interest-rate decision.

While the potential divergence in world monetary policy is a focus for investors, oil's sell-off is a complicating factor, with the Organisation of Petroleum Exporting Countries (Opec) having shown few signs it will vote to trim output this week.

Ms Yellen's speech on Wednesday "pushed investor concerns towards the impact of rate hikes, overshadowing the potential for the ECB to pull the trigger on further stimulus tonight", Mr Michael McCarthy, chief market strategist in Sydney at CMC Markets, wrote in an e-mail to clients.

"With analysts pointing to potential for both rate cuts and significant asset purchases, last night's sell-off may not see full transmission to Asia-Pacific trading. However, weaker commodity prices will likely weigh."

Energy producers drove a 1.1 per cent decline in the Standard & Poor's 500 Index on Wednesday, with WTI ending the session down 4.6 per cent. The Bloomberg Commodity Index retreated back to its weakest level since 1999.