LNG Liquefied Natural Gas Limited

By Chao Deng 

Most Asian shares fell after oil prices slid overnight and expectations firmed that the Federal Reserve will raise rates after its December meeting in two weeks.

Australia's S&P/ASX 200 fell 0.7%, South Korea's Kospi fell 1% and Japan's Nikkei Stock Average fell 0.1%. Hong Kong's Hang Seng Index fell 0.3%.

The Shanghai Composite Index rose 0.6% after a private gauge of China's services sector grew in November, albeit at a slower pace. Signs of slowing growth have stoked hopes of additional stimulus.

"We're seeing money withdrawn from these markets by U.S. based investors, " said Andrew Sullivan, managing director at Haitong Securities International. Many "prefer having money in the U.S. [if rates increase] even though the hike is going to be very small."

Lower oil and the prospect of higher U.S. interest rates are outweighing hopes for additional stimulus from the European Central Bank, which meets later Thursday. Economists and market watchers expect the central bank to reduce their deposit rate further into negative territory and add to their EUR60 billion ($63.5 billion) a month bond-buying program.

Energy shares on the S&P/ASX 200 dropped by 3% while materials stocks fell 1.6%. Miners BHP Billiton Ltd. and Rio Tinto Ltd. fell 1.6% and 2.4%, respectively. Woodside Petroleum Ltd. fell 4.5% and Oil Search Ltd. fell 2.1%.

Oil and energy stocks could continue to swing ahead of Friday's meeting of the Organization of the Petroleum Exporting Countries, which is expected to be one of the most contentious in years. The group decided last year not to cut output in a bid to defend, and win, market share against increased competition from the U.S., a policy that accelerated a price rout in oil.

U.S. crude oil dropped below $40 a barrel for the first time since August on Wednesday, as a buildup of supplies signaled a deepening global glut. Prices ended 4.6% lower on the New York Mercantile Exchange, the largest one-day percentage decline since Oct. 12.

Brent crude fell to a six-year low on Wednesday. The global benchmark declined $1.95, or 4.4%, to $42.49 a barrel on ICE Futures Europe, but gained 0.5% to $42.74 in Asia Thursday.

Meanwhile, the dollar rose after comments from Federal Reserve Chairwoman Janet Yellen that the U.S. economy appeared to be strengthening, a signal the central bank would raise rates soon, as expected. Going forward, market participants will assess U.S. nonfarm payroll data on Friday, which could offer further indications of the Fed's timeline for raising short-term interest rates.

The Wall Street Journal Dollar Index, which gauges the dollar against a basket of 16 currencies, was up 0.1% at 90.79 Wednesday in New York after rising as high as 91.02, its strongest level since December 2002.

Higher interest rates in the U.S. would raise borrowing costs and threatens to curtail a broad rally in global stocks during an era of ultralow rates.

A strengthening dollar also pressured copper and other base metals, which are priced in the currency. These assets typically become more expensive to buy for other currency holders when the dollar strengthens.

Copper futures settled down 1.9% at $2.033 a pound on the Comex division of the New York Mercantile Exchange. Among the other base metals, aluminum was flat at $1,442 a ton, zinc was down 0.9% at $1,531 a ton and nickel was up 1.2% at $8,440 a ton.

In China, shares in Shanghai traded slightly higher after the Caixin nonmanufacturing purchasing mangers index fell to 51.2 in November from 52 the previous month. Despite the decline, the reading remains above the 50-level that indicates expansion.

Earlier this week, an official gauge of manufacturing activity dropped to its lowest level since August 2012.

In currencies, the Australian dollar fell 0.1% to $0.7296. The local currency reached its highest in 1 1/2 months on Wednesday at $0.7342.

Gold hit a fresh six-year low earlier in Asia trade on a strengthening dollar. The yellow metal last traded down 0.3% at $1,050.30 a troy ounce.

Write to Chao Deng at Chao.Deng@wsj.com

(END) Dow Jones Newswires

December 02, 2015 23:40 ET (04:40 GMT)

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