Oil prices jumped a dollar and Asian stocks slipped on Monday as spreading tensions in Libya and other oil-producing regions encouraged some profit taking after last week’s solid gains.
Brent crude oil futures and U.S. crude futures both vaulted around $1/bbl to $103.50 and $87.31 per barrel respectively, while gold prices inched higher, adding to last week’s gains of nearly 3 percent.
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 .MIAPJ0000PUS eased by 0.3 percent after advancing 2.5 percent last week, its best weekly performance in two months.
“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.”
While some stock markets across the region have somewhat recovered after a sharp selloff in the opening weeks of 2011, analysts say selling pressure may intensify if tensions in the Middle East escalate further.
Asia-ex Japan equity funds saw the biggest weekly outflows in the second week of February since the first quarter of 2008, data from fund tracker EPFR Global showed.
Moreover, concerns that a breathtaking rally in U.S. stocks in recent weeks, which has boosted the region’s developed markets such as Australia .AXJO and Tokyo .N225 may be nearing a close, also weighed on sentiment.
U.S. 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 percent.
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.