Oil's drop chills Asian stocks, inflation data boosts dollar

By Shinichi Saoshiro

TOKYO (Reuters) – Asian shares were mostly lower on Friday as a sharp overnight pullback in crude oil prices dampened risk appetite, while the dollar was firm after upbeat U.S. data tilted expectations back toward an early interest rate hike by the Federal Reserve.

Strong factory output data and a weaker yen pushed Tokyo’s Nikkei <.N225> to a fresh 15-year high but the market was last flat as profit taking kicked in.

Elsewhere, South Korean shares fell after a seven-day rally and Malaysian and Thai stocks declined modestly, though markets in China and Australia gained.

MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was down 0.1 percent after advancing to a five-month high on Wednesday.

Spreadbetters forecast Britain’s FTSE <.FTSE>, France’s CAC <.FCHI> and Germany’s DAX <.GDAXI>, which hit a new record high overnight, to open slightly lower after recent rallies.

“Stimulus seems to be working a treat for some of the key markets around the world, including Japan and the Eurozone. Recent data out of Europe has also been showing some positive signs and this has really encouraged investors to drive equities higher,” Stan Shamu, market strategist at IG in Melbourne, said in a note.

The dollar inched down 0.2 percent to 119.14 yen <JPY=> after rising about 0.5 percent overnight from a low of 118.68. The dollar index hovered near a one-month high of 95.357.

Dollar bulls, disappointed earlier this week by perceived dovish signals from Fed Chair Janet Yellen, took heart again after data released on Thursday showed U.S. core inflation rose more than expected.

Robust U.S. durable goods orders also helped, with both sets of data driving Treasury yields higher and supporting the dollar.

Investors are now waiting on revised fourth quarter U.S. gross domestic product data due later on Friday for another health check of the world’s largest economy.

Economists polled by Reuters expected U.S. growth in the fourth quarter to be revised down to 2.1 percent from a preliminary 2.6 percent. <ECONUS>

“As growth in the upper range of 2 percent is the Fed’s prerequisite for an early and sustained rate hike, a figure just around or below 2 percent is likely to hurt expectations for a June hike and weigh on the dollar,” said Masafumi Yamamoto, market strategist at Praevidentia Strategy in Tokyo.

The euro was up 0.1 percent at $ 1.1212 <EUR=>, but still near the one-month low of $ 1.1184 plumbed overnight.

U.S. crude oil posted a rebound and was up 1.8 percent at $ 49.05 a barrel <CLc1> after plunging 5.5 percent the previous day as rising U.S. inventories countered expectations for recovering demand. [O/R]

Despite the sharp overnight slide, U.S. crude was still on track for its first monthly rise in eight. North Sea supply outages and renewed fears of gas supply disruption in Europe have recently supported prices.

(Editing by Shri Navaratnam)