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Asian Stocks Pressured by Surging Oil Prices

CNBC.com
Thursday, 8 May 2008 | 5:10 AM ET

Oil's relentless push to yet another record high pressured Asian shares across the board Thursday, raising fears that inflation -- and central bank measures to cool it -- would hurt consumer spending and profits.

The dollar rose against the euro, which fell to a six-week low against the U.S. currency as weak euro zone retail sales sparked concern about the region's economy.

U.S. crude added a further 23 cents to trade at $123.76 in early trade in Asia. Prices have doubled in a year and risen sixfold since 2002 on rising demand from China and other developing countries, adding pressure to economies already hit hard by a housing and credit crunch and rising food costs. The advance in crude oil prices to fresh highs came a day after investment bank Goldman Sachs said oil prices could scale $200 a barrel in the next two years as part of an ongoing "super spike" in the market. London Brent crude is also higher.

Tokyo's Nikkei 225 Average shed 1.1 percent, its first negative day in three, as financials such as Mitsubishi UFJ Financial Group and other recent gainers sold after a tumble on Wall Street.

Seoul shares closed down led by financials after the Bank of Korea kept its key interest rate unchanged, dashing hopes of a rate cut, while record high oil prices stoked worries about corporate profits.

Australian shares erased early losses finish nearly 1 percent higher after reassuring comments from two big Australian banks sparked a recovery in the financial sector, offsetting falls in the miners on weaker metals prices. Commonwealth Bank of Australia and Westpac Banking Corp said at an investor presentation that they were well-placed to ride out the global credit squeeze and that they have no plans to raise additional capital.

Hong Kong stocks fell 0.6 percent, tracking overseas markets, with oil refiners PetroChina and Sinopec leading the declines after crude prices hit a new record high. Sectors sensitive to high fuel costs, such as airlines, also fell. Flag carrier Air China fell, while China Southern and China Eastern also dropped.

Singapore's Straits Times Index dropped 2 percent with banks leading the declines. United Overseas Bank fell 3.6 percent, while Oversea-Chinese Banking Corp
lost 1.7 percent.

Chinese stocks rebounded, to close 2.2 percent higher, in response to signs that authorities were determined to support the market, but gains in the main index were limited by a slide in oil refining stocks because of high crude oil prices. Steel makers and coal producers rose sharply. China Shenhua Energy and Baoshan Iron & Steel, China's biggest steelmaker were both higher. But China's major oil companies, which are subject to price restrictions in the domestic retail market, slid on concern that higher crude prices would widen their refining losses.