Publications
Partners
Hong Kong - Oil prices jumped by over a dollar and Asian shares mostly eased on Monday as spreading tensions in Libya and other oil-producing regions encouraged some mild profit taking after last week's solid gains.
Further increases in oil prices may see selling pressure intensify in regional markets which have only recently begun to recover from a sharp selloff in the opening weeks of 2011.
Higher prices will pose fresh headaches for authorities already struggling to re-establish their inflation-fighting credentials in the face of rising food prices.
"I would be worried if the unrest spreads to Saudi Arabia," said Benson Wang of Commodity Broking Services in Sydney.
Brent crude oil futures and US crude futures both vaulted more than $1/bbl to $103.75 and $87.39 per barrel respectively, while gold prices inched higher, adding to last week's gains of nearly 3%.
Anti-government protesters rallied in Tripoli's streets at the weekend, tribal leaders spoke out against leader Muammar Gaddafi, and army units defected to the opposition as oil exporter Libya endured one of the bloodiest revolts to convulse the Arab world.
The MSCI's index of Asia Pacific shares outside Japan slipped by half a percent after posting its best weekly performance in two months last week. The energy sub-index rose 0.5%, the outperformer for the day.
The Nikkei ended 0.1% higher.
Beijing's latest move to tighten policy in the form of raising banks' required reserves saw Shanghai and Hong Kong stocks slip early, but Shanghai later reversed the losses, rising about 0.6%.
"There are few buying or selling cues in the domestic market. Investors will likely stay alert to geopolitical news that could affect markets across the world," said Hikaru Sato, a senior technical analyst at Daiwa Securities Capital Market.
"The Middle East continues to be a focus, while there are concerns about China."
Asia-ex Japan equity funds saw the biggest weekly outflows in the second week of February in three years while Japan funds posted their biggest weekly inflow in four years, data from fund tracker EPFR Global showed.
Moreover, concerns that a breathtaking rally in US stocks in recent weeks, which has boosted the region's developed markets such as Australia and Tokyo may be nearing a close, also weighed on sentiment.
US markets are shut on Monday for a public holiday.
China's benchmark short-term money market rate soared more than 300 basis points on Monday after Beijing on Friday raised required reserves for banks by 50 basis points to a record 19.5%.
FX view brightens
The foggy outlook for equities in the near term is in sharp contrast to the view emerging in the region's currency markets, where analysts are calling for more gains.
Barring the baht, yen and the rupee, all other Asian currencies have posted substantial gains so far this year, indicating authorities are allowing more currency strength to tackle inflation.
A monthly Reuters poll showed investors increased their long positions on the Indonesian rupiah, Singapore dollar, Philippine peso and the Chinese yuan while Standard Chartered strategists recommended overweight bets on Asian currencies.
China's move to nudge the yuan to a record high in recent weeks has also fueled gains. .
The euro held firm near two-week highs after hawkish comments from a European Central Bank official kept alive the prospects for the ECB to hike rates before the Fed.
The G20 meeting's outcome had little impact on markets after policymakers reached a fudged accord on how to measure imbalances in the global economy after China prevented the use of exchange rates and currency reserves as indicators.
