Energy Shares Detract From Broader Gains In Asian Markets
By Joanne Chiu
Asia-Pacific stocks gained Thursday, with benchmarks in mainland China advancing nearly 2%. Currency weakness helped lift other major indexes, including those in Australia and Japan.
Thursday's Big Theme
Regional energy companies fell after a steep drop in oil prices.
Oil slumped overnight after Libya indicated it would resume exports. The prospect of U.S. tariffs on a further $200 billion of Chinese goods also helped reverse crude's recent rally, by casting doubts on the economic outlook.
Light, sweet crude for August delivery logged its largest daily percentage drop in a year on Wednesday, crashing 5%. It recovered slightly on Thursday, rising 0.6% to $70.82 a barrel on the New York Mercantile Exchange.
Energy stocks felt the pinch. Among China's major-stated backed oil companies, Hong Kong-listed shares in PetroChina Co. fell 0.7% after dropping 1.5% in the previous session. CNOOC Ltd. and Sinopec Corp. also pulled back slightly. Meanwhile, the energy sub-index of Australia's benchmark S&P/ASX 200 fell more than 1%, declining for a second day.
The weakness in crude spilled over to commodity-linked currencies such as the Australian dollar, which fell 1.2% yesterday. It bounced 0.2% on Thursday.
Airline stocks bucked the trend. They benefit from lower fuel costs, although this can be eroded by currency moves. Hong Kong-traded shares of China Eastern Airlines Corp., which on Wednesday unveiled a $2.2 billion capital raising, jumped 4.9% while state-owned rivals Air China Ltd. and China Southern Airlines bounced 1% to 2%. All three have been highly volatile this year.
Michael McCarthy, chief market strategist at CMC Markets, said oil was hit by "a crumbling demand picture and resumption of Libyan supply.
"Despite a long lead time for the additional U.S. tariffs, markets moved immediately to re-price the risk of a global slowdown caused by the intended embargoes," he added.
ZTE Corp.'s Hong Kong-listed stock surged nearly 24% after the Chinese maker of telecommunications equipment cleared the last major hurdle to lifting U.S. sanctions. Its Shenzhen-traded shares rose 10%, the maximum they are allowed to move in a single day.
S&P 500 futures rose 0.3%, after the U.S. benchmark fell 0.7% in the previous session. The dollar index, which tracks the greenback against six major currencies, was flat at 94.759.
Write to Joanne Chiu at [email protected]