Asian stocks sink, oil prices climb on Syria fears

(AFP) – Asian markets fell sharply Wednesday, while oil prices rose and emerging-market currencies sank, as the West stepped up preparations for a possible military strike on Syria over a chemical attack.

The losses extended falls on Tuesday and followed drops on Wall Street and in Europe as investors ran for cover, while emerging-market stocks and currencies came under renewed pressure.

Adding to the geopolitical tensions in the Middle East are concerns about a looming row in Washington over the US debt ceiling, which could leave the country in political deadlock.

Tokyo tumbled 1.51 percent, or 203.91 points, to 13,338.46 as the dollar eased against the yen and Sydney shed 1.05 percent, or 54.0 points, to close at 5,087.2.

Seoul clawed back some early losses to end flat, edging down 1.32 points to 1,884.52.

Shanghai was off 0.11 percent, or 2.27 points, at 2,101.30 while in the afternoon Hong Kong was down 1.68 percent.

Emerging markets in Asia — already seeing selling because of the expected wind-down of the US Federal Reserve’s massive stimulus programme — were also suffering.

Jakarta was downl 2.28 percent, Kuala Lumpur was off 1.42 percent and Mumbai slipped 1.82 percent.

Manila was down 3.88 percent as traders grow jittery before the release of economic growth data on Thursday.

The West, led by the United States, is edging closer to a targeted strike on Syria, which is accused of carrying out a gas attack on August 21 that killed hundreds of civilians.

“We are prepared. We have moved assets in place to be able to fulfill and comply with whatever option the president wishes to take,” US Defense Secretary Chuck Hagel told the BBC on Tuesday.

The possibility of more turmoil in the oil-rich region saw crude prices extend gains.

New York’s main contract, West Texas Intermediate for delivery in October, jumped $2.95 to $111.96 a barrel in afternoon Asian trade. The contract hit an intra-day high of $112.23.

Brent North Sea crude for October was up $2.81 at $117.17 after peaking at $117.22.

Kathy Lien of BK Asset Management said: “The possibility of a military strike on the country (Syria) is growing by the minute and investors are worried that it could destabilise the region.”

On Wall Street, the Dow fell 1.14 percent, the S&P 500 lost 1.59 percent and the Nasdaq tumbled 2.16 percent, while Paris and Frankfurt each lost more than two percent.

In forex trade, the dollar sat at 97.25 yen in Asia on Wednesday, up from 97.01 yen late in New York but well down from levels above 98.00 yen in Tokyo Tuesday.

The euro bought $1.3381 and 130.21 yen compared with $1.3391 and 129.88 yen.

India’s rupee continued to suffer, slumping almost four percent to 68.74 against the dollar — another record low — as fears over Syria compounded domestic economic woes and expectations the US will wind down its stimulus programme.

The unit later picked up slightly to 68.45.

The Indonesian rupiah dived to 11,418 against the dollar from 10,925 rupiah, while the greenback was at 44.79 Philippine pesos from 44.43 pesos.

“The situation with Syria has been playing havoc with currency markets for the last few days,” said Kenichi Hirano, market adviser at Tachibana Securities.

“Any action by the US is not likely to be protracted. But wrangling over the national debt could go on for quite a while, as we’ve seen in the past.”

Dealers are increasingly concerned about a repeat of the 2011 debt ceiling stand-off that brought Washington close to defaulting on its repayments and preceded a downgrade of its AAA sovereign rating.

Treasury Secretary Jacob Lew said this week the $16.7 trillion limit will be reached in mid-October, raising the chances that Republicans and Democrats will engage in another game of brinkmanship.

Gold cost $1,424.10 an ounce, near a three-month high, at 0700 GMT on Tuesday, up from $1,410.75 late Tuesday.