Image: A man riding on a bicycle looks at an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo, Japan, February 4, 2016. . REUTERS/Yuya Shino
By Lisa Twaronite
TOKYO (Reuters) – Asian shares dropped on Monday, dragged down by tumbling crude oil futures after producers’ weekend talks failed to address the global supply glut.
Some 18 oil exporting nations had gathered in the Qatari capital of Doha to try to agree to stabilize output at January levels until October 2016. The pact fell apart after Saudi Arabia demanded that Iran join in.
Brent crude futures tumbled about 5.2 percent to $40.86 while U.S. crude slid about 5.5 percent to $38.15.
“Given the strong correlation between the oil price and equities, Asian markets are not looking like they will have a good start to the week,” said wrote Angus Nicholson, market analyst at IG in Melbourne.
“Commodities are likely to drive the pullback in equities today, with materials and energy stocks in for a difficult session,” Nicholson said. “We will quite likely see credit’spreads widen again today, as the oil price has been a major driver for high yield credit.”
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.6 percent lower in early trade.
SP 500 e-mini futures dropped 0.6 percent. Wall Street ended with modest losses on Friday but major indexes still posted weekly gains.
The Nikkei stock index fell 3.2 percent, as investors weighed the impact of devastating earthquakes in western Japan’s Kyushu on manufacturers’ supply chains.
A 7.3 magnitude tremor struck early on Saturday, following a smaller temblor on Thursday, centered in the region’s Kumamoto prefecture, an important manufacturing hub.
The plunge in crude oil prices took a large slice out of commodity currencies.
The greenback gained 1.2 percent against the Canadian dollar to C$1.2969 while the Australian dollar shed 1.1 percent to $0.7641.
The Japanese yen, a perceived safe-haven, benefited from the turmoil, with the dollar skidding 0.6 percent to 108.07 yen.
The euro was down 0.4 percent at 122.10 yen after earlier dropping to 121.95, its lowest since April 2013.
The euro edged up about 0.2 percent to $1.1300, while the dollar index edged down 0.1 percent to 94.656.
(Editing by Shri Navaratnam)
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