Asian stocks weighed down by another oil price dive

Dollar selling hit fever pitch in NY as a weak USA service sector report – and a global growth warning by a top Federal Reserve official – threw into question the timeline for more Federal Reserve interest rate hikes this year.

The euro, which has also benefited from safe haven flows in the past month, rose 0.3 percent to $1.0920, within the $1.0711-$1.0985 range it has held since the start of the year. That was a relief to investors as well since a plunge in the price of crude oil has been decimating profits at energy companies.

The dollar tumble, as well as recent interventions by China’s central bank, have eased fears of further yuan depreciation any time soon. There’s also concern that the slowing economy might put the brakes on the Federal Reserve’s plans to raise interest rates, which ultimately help banks make more money by raising borrowing rates on loans.

The slump in oil dominated the mood on Asian markets Wednesday after falling back below $30 a barrel, hammering energy firms once again and sending stocks deeper into the red.

JPMorgan Chase lost $1.83, or 3.1 percent, to $57.03, Bank of America dropped 73 cents, or 5.2 percent, to $13.23 and Citigroup fell $2.06, or 5 percent, to $40.42.

Benchmark US oil was up 29 cents at $30.17 a barrel in electronic trading on the New York Mercantile Exchange after being lower during much of the Asian trading day.

In early European trade London and Frankfurt shed 0.4 percent and Paris was off 0.5 percent.

In China, the Shanghai Composite Index gained 1.8 per cent as trade wound down ahead of the Lunar holidays.

E-mini futures on the Standard & Poor’s 500 Index slipped 0.1 percent on Wednesday. Hong Kong stocks leaped 1.7 percent, in part because the USA dollar’s fall lessened strains on the HK dollar’s peg.

“Weaker oil prices mean interest rates stay lower for longer”, said Marc Chandler, chief global currency strategist at Brown Brothers Harriman & Co.

Crude resumed its downward trend this week jettisoning most of the gains seen in a rally last week fuelled by hopes for OPEC-Russian talks on output cuts.

The Australian dollar, whose movement is closely tied with fluctuations in commodities, reached its weakest level in one week, although the local currency was last flat against the greenback compared to its level late yesterday in Asia.

China is targeting a growth target of 6.5-7 percent for this year, slower than the objective of about 7 percent in 2015, National Development and Reform Commission Chairman Xu Shaoshi told reporters late Wednesday. The euro was enjoying the view at US$1.1085 (RM4.614), having climbed 1.7 per cent yesterday.

Oil has still lost about 12 percent this year amid brimming USA crude stockpiles and the outlook for a boost in Iranian exports after the removal of global sanctions.

MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 2 per cent. Australia’s resource-rich index rose 2.1 per cent.

The £1.6bn ($2.3bn) flotation of Clydesdale Bank was postponed on Tuesday for 24 hours.