Asia stocks fall as oil price depresses outlook

Hong Kong - Asian markets fell on Thursday as a slump in the oil price, driven by fresh indications of an oversupply, depressed the outlook for equities and global growth.

The dollar also slipped against its major peers overnight as expectations of a US rate interest rate hike in the near future began to fade along with enthusiasm from recent strong US jobs data.

US and European markets mostly lost ground, giving Asia a weak lead.

"The major story overnight is the dramatic 3.0% drop in WTI oil," Angus Nicholson, a strategist at IG Markets, said in a note. "Equities look set to follow the US markets lower in the Asian session."

"Oil is increasingly pulling back towards the US$40 a barrel level again and many in the markets are concerned that the shorts may even be looking for prices to drop down towards the $35 level."

Oil prices have been fluctuating since entering a "bear" market last week, falling more than 20% from recent highs above the $50 seen in early June and closing below $40 a barrel for the first time since April.

"The biggest risk to the market at the moment is a huge drop in oil prices," said James Woods, a strategist at Rivkin Securities in Sydney. "We'll see some near-term weakness in the coming weeks."

Weekly figures released Wednesday by the US Energy Department showed that crude stocks remained high last week at 523.6 million barrels, up 0.2% from the prior week and still more than 15% above the same point last year.

A monthly report from the Organization of Petroleum Exporting Countries meanwhile showed Saudi Arabian oil production at nearly 10.5 million barrels per day in July.

At about 03:00 GMT, West Texas Intermediate was trading at $41.40 while Brent was at $43.76.

Sydney and Taipei tumbled by more than 1.0% in early trade while Seoul, Manila and Singapore were all down.

Wellington was flat after New Zealand's central bank cut interest rates by 0.25% to a new record low of 2.0%, but the Kiwi dollar jumped following the announcement $0.01 to hover around $0.73.

The rate reduction was in line with market expectations, and the bank indicated more cuts may be required to spur the economy.

Energy stocks lower

Japanese financial markets were closed for a national holiday. Hong Kong opened down but had recovered some ground by mid-morning.

Shanghai was also flat as investors awaited the release of more economic data. The government is due to release economic indicators - including industrial output and retail sales - later this week.

Data released on Tuesday showed China's producer prices fell in July at their slowest rate in nearly two years, fuelling hopes the end of a painful slowdown could be in sight for the Asian powerhouse.

Energy stocks were among those hit in the region on Thursday, with Hong Kong-listed PetroChina down 0.9%, while Sydney's WorleyParsons retreated 3.1% and Santos lost 2.7%. In Shanghai, China Coal Energy Co slumped 2.2%.

European markets were also hit by weak economic data in France. And in the US, the broad-based S&P 500 lost 0.3%, with energy and banking shares hit.