Tokyo: Asian shares edged lower on Thursday, weighed down by worries that a surge in oil prices could exacerbate inflation pressures in the region and cripple economic growth.
US oil futures rose 0.3%, following a 2.5% jump in Brent oil late on Wednesday to $115.94 a barrel. Oil advanced as fighting in Libya worsened and OPEC saw no need for an emergency meeting to consider raising output. Fears that Libya’s uprising could spread further in the Middle East also dented market sentiment.
“Tensions in the (Middle East) will ... remain on our radar. We have reiterated the importance of Friday’s Day of Rage in Saudi Arabia,” said Jessica Hoversen, currency strategist at MF Global in Chicago.
The dollar has moved with swings in oil prices. Higher oil prices tend to be negative for the greenback as the US is a major oil importer.
The surge in oil could hurt major economies like Japan, the world’s third largest. On Thursday, the Cabinet Office said Japanese gross domestic product shrank a revised 0.3% in the final quarter of 2010.
Analysts polled by Reuters expect Japan’s economy to grow 0.5% in the current quarter on improved exports and factory output. The economy is seen likely to continue growing this year, but high oil prices pose a risk to the outlook.
Japan’s Nikkei average fell as well, mainly pressured by the weakness in US stocks, with soaring oil a negative factor as well. The benchmark Nikkei shed 0.4%, or 42.39 points to 10,547.11. The broader Topix index fell 0.3% to 941.16.
Seoul shares were also lower on Thursday, with technology plays facing pressure after U.S. tech stocks fell on a weak outlook from Texas Instruments. Investors were also wary of an expected rate hike by the Bank of Korea later on Thursday.
Shares in Samsung Electronics and Hynix Semiconductor both fell 1.5%.
The Korea Composite Stock Price Index (KOSPI) was down 0.15% at 1,998.40 points.
US Treasuries rallied on renewed fears of a debt crisis in Europe after Portugal saw its cost for issuing two-year debt soar to its highest level since it joined the euro in 1999. That magnified fears that Portugal may need a bailout.
U.S. benchmark 10-year Treasury notes were unchanged, following gains the previous session. The yield was at 3.477%, down from 3.475% on Wednesday.
European debt fears also weighed on the euro, which was flat against the dollar on Thursday, after hitting a four-month peak on Monday. A European Union summit on Friday to discuss ways on how to overhaul the euro zone economies also contributed to the euro’s pullback. In early Tokyo trading, the euro was little changed at $1.3915.