Asia stocks start 2016 on weak note as Middle East weighs

January 3, 2016

SEOUL, South Korea (AP) — Asian stock markets started 2016 on a weak note Monday as poor manufacturing data from the world’s second-largest economy and escalating tensions in the Middle East weighed on investor sentiment.

KEEPING SCORE: Japan’s Nikkei 225 dropped 2.4 percent to 18,575.26 and South Korea’s Kospi fell 1.4 percent to 1,934.77. Hong Kong’s Hang Seng slipped 2.1 percent to 21,457.70. China’s Shanghai Composite Index slumped 3.8 percent to 3,405.23. Australia’s S&P/ASX 200 dipped 0.3 percent to 5,282.80. Stocks in Taiwan and Southeast Asia were also lower.

MIDDLE EAST: Saudi Arabia said Sunday it is severing diplomatic relations with Iran after protesters set fire to the Saudi Embassy in Tehran and Iran’s top leader criticized the world’s largest oil supplier for executing a prominent Shiite cleric. Escalating tensions in the Middle East pushed up the price of oil, analysts said. “Oil markets will be concerned that this could be an incremental step in a deteriorating political situation that might ultimately threaten world oil supply,” Ric Spooner, chief analyst at CMC Markets, said in a commentary.

CHINA DATA: An index of China’s manufacturing activity ticked up to 49.7 in December from 49.6 in November but it still remained below the 50-mark indicating contraction. The data released Friday showed a persistent contraction in factory activity despite Beijing’s stimulus measures, adding to a downbeat outlook for Asian exporters.

ANALYST’S TAKE: China’s factory data is “still a long way off stirring up cheer about global demand recovery,” said Mizuho Bank Ltd. in a daily commentary. “Asian exporters are expected to continue struggling with exports contraction and growth prospects dampened by related manufacturing gloom.”

WALL STREET: U.S. markets finished 2015 lower on Thursday. The Dow ended the last trading day 1 percent lower at 17,425.03. The S&P 500 index lost 0.9 percent to 2,043.94. The Nasdaq composite fell 1.2 percent to 5,007.41. For 2015, the Dow registered a loss of 2.2 percent, marking the first down year for the Dow since 2008. The Nasdaq ended with a gain of 5.7 percent. The S&P 500 index, regarded as a benchmark for the broader stock market, lost 0.7 percent for the year.

YEAR AHEAD: Analysts said central bank monetary policy decision and weak commodity prices will be main themes in 2016. “I think traders will be focused on the pace of global growth, as it will doubtlessly affect the policy decisions of major central banks and the commodity sector,” said Bernard Aw, a market strategist at IG in Singapore.

ENERGY: Benchmark U.S. crude added 77 cents to $37.81 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 36 cents to close at $37.04 per barrel on the last trading day of 2015. Brent crude, used to price international oils, rose 85 cents to $38.12 a barrel in London.

CURRENCIES: The dollar weakened to 120.05 yen from 120.26 yen. The euro rose to $1.0866 from $1.0861.