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OPEC output cut sinks Asian shares
( 2003-09-25 12:24) (Agencies)

OPEC's decision to cut oil production sapped the dollar and Asian share markets, which were already reeling from the yen's strength, and sent gold to a fresh seven-year high on Thursday.

The Organization of Petroleum Exporting Countries (OPEC) removal of 900,000 barrels a day from supply limits for 10 members from November sparked concerns that higher energy costs would stifle an economic rebound in the U.S.

Japan's Nikkei average fell more than two percent to four-week lows by midsession, led by a 6.21 percent fall in All Nippon Airways. Fuel typically accounts for 15-20 percent of airlines' operating costs.

"This isn't enough to immediately change the economic recovery scenario, but it is certainly one more thing the market has to worry about looking ahead," said Kotaro Aoki, market analyst at Ichiyoshi Securities.

The Nikkei ended the morning down 2.34 percent or 245.34 points at 10,256.95 after hitting a four-week intraday low of 10,225.48. MSCI's dollar-based index of Asia Pacific markets outside of Japan was off 1.11 percent by 10:50 p.m. EDT Wednesday.

Exporters have suffered since a G7 communique this weekend appeared to encourage Asia's top exporters to stop intervening to weaken their currencies to make their exports cheaper.

The rising oil price would hit export-oriented nations on the import side, as most of Asia's top exporters also import either most or all of their oil. Asian oil producers had been benefiting from the weaker dollar, expecting costs to go down.

Oil futures surged more than four percent in New York. Analysts expressed surprise over OPEC's decision to tighten the taps together instead of letting the world's top producer, Saudi Arabia, quietly trim production.

November crude jumped $1.11 gain in New York and had risen another four cents to $28.28 -- well above a four-month low of $26.65 set just last Friday.

Spot gold was at $388.75 an ounce after surging to $389.25, the highest since September 1996.


The dollar was under pressure after wilting in New York under the weight of falling U.S. stocks, but stopped short of another three-year low against the yen after a top Japanese official made veiled threats of intervention.

"Falling stocks are having a negative effect on the dollar," said Tim Mazanec, senior currency strategist with Investors Bank & Trust in Boston.

The dollar bought 111.87 yen, while the euro bought $1.1476 and 128.37 yen.

Haruhiko Kuroda, formerly Japan's top financial diplomat and now a special adviser to the cabinet, sent a warning signal to foreign exchange markets.

In a television interview, he warned that Japan is prepared to intervene if necessary, and said he would not be surprised if the dollar rises between 2 and 3 yen on the unwinding of long-yen positions.

U.S. stocks fell sharply on Wednesday after the OPEC cut with technology shares -- an area of particular strength through the spring and summer -- leading the retreat.

The tech-packed Nasdaq Composite Index posted its biggest one day percentage loss in about six months.

The Dow Jones industrial average skidded 150.53 points, or 1.57 percent, to 9,425.51. The broader S&P 500 fell 1.91 percent to 1,009.38, and the Nasdaq Composite dropped 3.05 percent to 1,843.69, based on the latest available figures.

Asian share markets that rely heavily on oil imports were sharply lower. South Korea's main KOSPI share market sank 2.6 percent, Taiwan's weighted index was off 1.08 percent and Australia's S&P ASX 200 had fallen 1.08 percent.

Other markets were faring better. Hong Kong's Hang Seng index was unchanged, supported by gains in Chinese oil producer CNOOC, which was up 1.13 percent. Singapore, Asia's main oil hub, saw it's stock market slip 0.68 percent.

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