Asia stocks lost ground yesterday as low oil prices dented sentiment and investors awaited Premier Shinzo Abe’s announcement on details of the government’s massive stimulus programme.
The Australian central bank’s decision to slash interest rates to a new record low of 1.5% also saw Sydney fall by the close but the Aussie dollar cancelled out initial losses to add 0.2%.
Crude prices rebounded modestly in Asian trade but were still hovering near three-month lows of around $40 a barrel a day after slipping into a bear market, taking the wind out of energy and commodity-linked shares.
“Oil prices are once again the source of major pressure on emerging markets,” Rakpong Chaisuparakul, an investment strategist at KGI Securities (Thailand) in Bangkok, told Bloomberg News.
At about 0640 GMT, US benchmark West Texas Intermediate for September delivery was up six cents to $40.12 a barrel while North Sea Brent for October rose 10 cents to $42.24. Energy firms seeing losses included Australia’s Woodside Petroleum, which dropped 2.2%, Tokyo-listed Inpex and refiner JX Holdings — diving 5.5% and 2.2% respectively.
In Tokyo, investors waited for the government to offer some specifics on the whopping $273bn fiscal package announced last week to kick start the world’s number-three economy.
The benchmark Nikkei 225 index shed 1.5% by the close, with losses picking up in the afternoon on media reports about details of the programme.
Few details about the plan — particularly the amount of fresh spending — were revealed when it was unveiled last week, before the Bank of Japan disappointed markets with only minor tweaks to its own measures on Friday.
Bloomberg News reported yesterday that Japan’s government is set to announce ¥7.5tn in new spending starting this year, citing a draft of the plan being discussed by ruling party lawmakers.
Japan’s economy is suffering from sluggish growth as a recent spike in the yen threatens corporate profits.
“There’s a growing sense that there’s disappointment coming in the announcement this afternoon from the prime minister,” Michael McCarthy, chief market strategist at CMC Markets Asia Pacific in Sydney, told Bloomberg.
Sydney fell 0.8% after the Reserve Bank of Australia cut rates by 25 basis points to support the economy as it transitions away from a decade-long mining boom.
The widely-expected move followed official figures last month showing that consumer prices fell to a 17-year annual low of 1.0% in April-June, well off the RBA’s inflation target of 2.0-3.0%.
“The Reserve Bank have effectively thrown caution to the wind, respecting their mandate for price stability, amid diminishing negative effects from lower interest rates,” said Chris Weston, an analyst for IG in Melbourne.
Elsewhere, Singapore lost 1% and Seoul fell 0.5%, while Taipei and Manila were also lower. In Tokyo, the Nikkei 225 down 1.5% at 16,391.45 points and Shanghai — Composite up 0.6% at 2,971.28 points. Hong Kong closed yesterday.