Plunging oil prices affect Asian stock market

By @pathakmishra on
People are reflected on an electronic board showing the Japanese yen's exchange rate against the U.S. dollar outside a brokerage in Tokyo November 20, 2014. Asian stocks mostly fell on Thursday as fresh data signalling a further loss of momentum in China'
People are reflected on an electronic board showing the Japanese yen's exchange rate against the U.S. dollar outside a brokerage in Tokyo November 20, 2014. Asian stocks mostly fell on Thursday as fresh data signalling a further loss of momentum in China's economy weighed on sentiment, while the yen slid to multi-year lows against the dollar and euro. The dollar hovered near a new seven-year peak of 118.275 yen reached early in the session. Reuters/Toru Hanai

The value of Asian stocks has decreased after Wall Street indicated a downfall due to the deteriorating crude oil prices. The slip of the stock value has prompted investors to reconsider looking into certain shares.

The declining economic scenario has hit the market prior to the expected rise in US rates by the Federal Reserve this week. In addition to falling Asian stock prices, the plunging oil costs have also affected China’s currency, taking it to 4-1/2 year lows.

The People’s Bank of China declared on Monday that the value of yuan has hit the weakest since July 2011. The Chinese indicators, encouraged and released over the weekend, hardly had any positive effect on the downing commodity markets. This, in turn, has strengthened the US treasuries and thereby helped in raising the value of US dollar.

Morgan Stanley and Capital Group International’s broadest Asia-Pacific shares index outside Japan indicated a downfall of 0.9 percent following a 2-1/2-month low. Japan’s Nikkei recorded decline of 2.3 per cent while South Korea’s Kospi witnessed a fall of 1.3 per cent. Australian shares value deteriorated by 1.5 per cent.

Dataset recorded on Saturday showed that factory output in China grew to a five-month high in November, while retail sales increased at a pace of 11.2 percent annually. On Friday, Dow shares dropped to 1.8 per cent, while SP sank to 1.9 percent.

“It’s fair to say that equities are going to be truly tested over the coming four days, and the Fed will be a catalyst for volatility in the lead up to Thursday,” wrote IG Markets strategist Evan Lucas.

After the International Energy Agency warned that the supply of crude oil could witness a major drop in 2016, the oil costs have continued to decline. US crude oil sank 0.2 per cent at US$35.54 (AU$49.4) per barrel after reaching US$35.16 (AU$48.9) on Friday, which had been the lowest since February 2009.

The Federal Reserve is all prepared to decide on the rise of the US interest rate during its final meet of 2015 on Dec 15-16.

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