Oil fears shake recovery hopes

ASIAN investors trod warily as growing Middle East tensions raised concerns about further sharp increases in oil prices.

More than 75% of Asia's oil comes from the Middle East, and traders and analysts fear that the nascent economic recovery could be slowed by further price increases. Airline stocks followed overnight losses by European operators on worries that higher fuel prices would stall the slow climb back to profits. Shares in Hong Kong's Cathay Pacific and Singapore Airlines tumbled by about 5%.

With some blatant pump priming from the Japanese government pension funds, the Nikkei 225 extended Tuesday's strong gains before falling back to 11,400.71, a gain of 1.96 points at the close. Technology shares failed to benefit from the buying spree, after Nasdaq's overnight tumble of 3% unnerved investors in Tokyo and the rest of the region.

A warning from Goldman Sachs that Microsoft's earnings would fall short of expectations, and that IBM sales would be weak, dulled recent expectations of a consumer-led recovery. Advantest, which makes chip-testing gear, slid more than 3% after a report that it was heading heavily into the red. Oil and chemical related stocks in Japan were moving ahead under their own steam on hopes that higher crude prices would translate into stronger downstream earnings.

Weakness on Wall Street, where interest rate concerns are being added to earnings worries rebounded on Hong Kong stocks. The Hang Seng index drooped 43.5 points to 10,834.5 as investors awaited developments on US interest rates - instantly followed by local banks because of the local currency's peg to the greenback.

Locally-quoted mainland oil producers continued to benefit from the prospects of higher oil prices. Shares in CNOOC, the country's largest producer, reached record highs in early trade, but were later brought back by profit-taking, which still left the week's gain at 10%.

Strong local demand for South Korean car makers following reports of good domestic sales kept the Kospi index out of trouble, despite the weakness of tech stocks on Nasdaq's 3% fall, and it stayed above the key 900 level with a gain of 3.63 points to 908.97.

Taiwanese investors were also in resilient mood, and stronger oil-related stocks overcame weakness in computer counters. The Weighted Average rose 20.67 points to 6264.13. In Singapore the fall in Singapore Airlines compounded weakness in banks and technology counters to take the Straits Times index down 15.2 points to 1782.1.

Australian bank shares bounced, following a no-change decision on interest rates which rescued the All Ordinaries index after News Corporation shares followed its overnight 4% tumble in the US. The index closed at 3339.4, up 0.9 points.

Oil price fears took Thailand stocks down almost 2%, the SET index losing 7.01 points at 363.81. Nervous trading in Malaysia sent the Kuala Lumpur Composite 4.64 points lower to 750.78, while Indonesia's Jakarta Composite drifted off 0.54 points to 488.55.

Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed on the site.