Asian stocks retreated Tuesday, with energy companies sliding after a drop in oil prices, and as investors awaited a decision from the Bank of Japan for clues to central bank thinking around the world.
Economists do not expect the BOJ to announce any major new moves, after it shocked markets by introducing negative interest rates at its last gathering in January.
That was seen as a desperate attempt to prop up Japan’s faltering economic growth plans, highlighting concerns that central banks are running out of ammunition to boost up the sagging world economy.
Last week the European Central Bank slashed already record low interest rates, pledged to pump more money into the banking system and, for the first time, said it would start buying corporate bonds.
Investors also see the BOJ as a prelude to a US Federal Reserve meeting, starting Tuesday, which will be closely watched for clues to whether the world’s most powerful central bank will raise interest rates any time soon.
“Before the US central bank takes centre stage, the Bank of Japan provides the proverbial warm up act,” Tony Farnham, a Sydney-based strategist at Paterson’s Securities, told Bloomberg News.
“No changes are expected by the BOJ at this meeting, but further stimulus initiatives in April are not beyond the realms of possibility.”
Japanese stocks edged down as traders awaited news from the BOJ’s two-day policy meeting, due this afternoon, while Shanghai and Hong Kong also fell.
Chinese shares lost ground in early deals, as investors took profits from a rally in the previous session driven by a pledge from the regulator it would keep stabilising volatile equities.
– Energy stocks tumble –
Sydney also dropped more than one percent, hit by a slump in energy companies after oil pries slid, and as traders digested the minutes from a Reserve Bank of Australia meeting.
Energy shares across Asia took a battering after US crude prices tumbled more than three percent in the previous session, as hopes faded that major producers would stop pumping in a bid to dampen a glut of global supplies.
A slight uptick in oil prices on Tuesday — the US benchmark added eight cents to 37.26 and the global measure, Brent, climbed five cents to 39.58 — was not enough to support energy companies.
Australia’s Sundance Energy collapsed almost 17 percent, while CNOOC lost 1.43 percent and Sinopec dropped 1.23 percent in Hong Kong.
Russia on Monday said a meeting to discuss an output freeze had been pushed back to next month, while news Iran will not temper its production until it reaches four million barrels per day (bpd) weighed on crude.
The Organization of the Petroleum Exporting Countries (OPEC) estimated Iran pumped out 3.1 million bpd of crude in February, up from 2.9 million in January.
Evan Lucas, a market strategist at IG Markets in Sydney, predicted oil prices will average around 35 a barrel in the second-quarter, after briefly climbing above 40 for the first time this year.
“The rebalance appears to be partly based on the view that Chinese demand and OPEC freezes will rebalance the supply/demand equation,” he said.
“However, that is clearly not the case and market saturation is more likely capping the price in the short-term.”
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: DOWN 0.12 percent at 17,212.30
Shanghai – composite: DOWN 0.61 percent at 2,842.39
Hong Kong – Hang Seng: DOWN 0.59 percent at 20,313.89
Euro/dollar: UP at 1.1110 from 1.1103 on Monday
Dollar/yen: DOWN at 113.60 yen from 113.78 yen
New York – Dow: UP 0.1 percent at 17,229.13 (close)
London – FTSE 100: UP 0.6 percent at 6,174.57 (close)
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