Oil hits high, stocks fall on security fears

Oil hits high, stocks fall on security fears

Agencies, Singapore/Jakarta

Oil prices hit a record high on Monday and Asian stocks retreated as a U.S. security alert deepened investor fears about the resilience of a U.S. recovery and the risk to the global economy from terror attacks.

The dollar eased after Washington warned al Qaeda may attack financial institutions such as the New York Stock Exchange, World Bank and Citigroup, rattling investors already worried about weaker-than-expected U.S. economic growth figures.

Oil climbed 12 cents to hit a record high of $43.92 a barrel on concerns over supply disruptions and the latest security alert. The dollar's fall pushed gold higher, while Japanese bonds fell slightly ahead of an auction on Tuesday.

Most Asian share markets fell, with Japan's Nikkei stock average closing down 0.9 percent at 11,222.24. South Korean shares slid 2.1 percent to a 10-month closing low and Taiwan ended 1.3 percent lower.

"There are some buyers who are looking to buy stocks on dips, but the overall market is surrounded by much bigger clouds -- security fears, higher oil prices and currency market moves," said Teruhisa Ishikawa of Mizuho Investors Securities' investment information department.

"Investors are thinking that it's wiser to stay still for a while than chasing (stocks), even undervalued ones."

MSCI's broadest index of Asia-Pacific shares outside Japan had dropped 0.4 percent by 0620 GMT.

Its tech component slid 1.8 percent to stand just off one-year lows hit last week amid fears of weak business outlooks as Japan's earnings season got into full swing.

Shares fell 0.6 percent in Hong Kong, while Australia bucked the trend to rise 0.3 percent.

Exporter and airline shares suffered heavy losses due to high oil prices, fears over the U.S. economic outlook and the security warning.

Dealers said the increased security threat would boost the oil market, which is already worried by possible sabotage strikes on oil infrastructure in the Middle East at a time when producers are pumping close to full tilt to supply soaring oil demand.

Japan Airlines Corp., Asia's biggest airline, fell 2.5 percent, while Singapore Airlines Ltd., the world's second-most valuable airline, dropped 2.7 percent.

In Indonesia, shares ended lower as investors continued to sell most blue chips due to ongoing security concerns during the national leadership transition period, dealers said.

"Overall sentiment was very weak and cautious," said a trader with a local securities firm. She said many investors stayed on the sidelines amid an absence of fresh leads.

Dealers said rising inflation due to the weakness of the rupiah had renewed worries that the central bank may further raise the interest rate to defend the local currency.

The Jakarta Stock Exchange composite index ended down 7.525 points, or 1 percent, at 749.458.

The rupiah ended slightly higher Monday, tracking the yen's rise against the dollar, dealers said.

The dollar closed at Rp 9,140, down from its close Friday at Rp 9,150.

Dollar demand from local companies, which was partly responsible for the currency's rise toward the end of July, evaporated, dealers said. Local companies usually buy the greenback around the end of the month to pay maturing offshore obligations.