Asian shares rise after oil price drop

2011-02-25 09:41

Bangkok - Asian shares were higher on Friday as oil prices eased and Wall Street stabilized after two days of sharp losses amid a political revolt threatening to topple the government of Opec-member Libya.

Oil prices hovered near $98 a barrel in Asia - after reaching $103 the previous day - after experts said the crisis in Libya may have cut crude supplies less than previously estimated. In currencies, the dollar continued its descent against the euro but was higher against the yen.

Markets remained cautious as investors monitored the events in Libya. Many of the region's main bourses struggled to find direction before moving into positive territory at midday amid profit-taking.

Japan's Nikkei 225 stock average rose 0.5% to 10 501.27 and South Korea's Kospi also added 0.5%, to 1 960.44.

Hong Kong's Hang Seng index jumped 1.7% to 22 990.26 and Australia's S&P/ASX 200 was 0.7% higher at 4 840.30. The Shanghai Composite index rose 0.2%t to 2 885.60.

Among the day's gainers, shares of Toyota jumped 1.6%. They were perked by news US federal regulators had closed an investigation into the Japanese automaker after it agreed to recall another 2.7 million vehicles to address accelerator pedals that could become trapped in floor mats or jammed in driver's side carpeting. That satisfied the Transport Department that Toyota's recalls for pedal entrapment were sufficient.

Airline stocks that had sagged after the spike in the cost of crude regained their stride after the International Energy Agency said the rebellion in Libya may have cut oil production less than originally feared. Saudi Arabia also pledged to increase production to make up for any shortfalls.

Cathay Pacific Airways jumped 3.6%, China Eastern Airlines climbed 2.1% and Asiana Airlines rose 1.4%.

But analysts cautioned that the end of the crisis was not yet in sight. Prices would likely spiral upward, particularly if the Middle East unrest that recently toppled regimes in Egypt and Tunisia spreads to oil powerhouse Saudi Arabia.

"I think oil prices are going to trade higher, even with Saudi assurances. I think Opec wants to see higher oil prices," said Tom Kaan of Louis Capital Markets in Hong Kong. "I am not optimistic on airlines or the transport sector."

"Oil is pretty much unpredictable, but in the short term, I do not see oil trading back at $85 a barrel. I think the floodgates are open for oil prices" and they could go as high as $120, Kaan said.

Meanwhile, New Zealand's benchmark retreated 0.1% three days after an earthquake in the second-largest city of Christchurch killed at least 113 people.

In New York on Thursday, investors were relieved to see oil prices fall for the first time in nine days.

The Dow Jones industrial average fell 37.28 points, to 12 068.50.

The broader Standard & Poor's 500 index fell 1.30, to 1 306.10. The Nasdaq composite bucked the trend, rising 14.91 points, to 2 737.90.

In currencies, the dollar rose to ¥81.93 from ¥81.77 late on Thursday. The euro gained to $1.3827 from $1.3807, extending a sharp rise over the past 10 days.

Analysts said the swing was probably due to expectations that European interest rates would be raised before Federal Reserve Chairperson Ben Bernanke does the same in the US Higher rates typically support a currency's value.

Benchmark crude for April delivery was up 49c to $97.77 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 82c to settle at $97.28 a barrel on Thursday.