Asian stocks hit by oil, financial jitters

Asian stocks tumbled on Friday, with Shanghai plunging more than 5% and Tokyo striking a two-month low as investors dumped shares on worries about high oil prices and the weak US economy.

Concerns grew that higher energy costs will eat into corporate earnings and weigh on consumer spending, while leading to higher interest rates that could further put the brakes on global economic growth.

Tokyo slid 2%, extending a losing streak to a seventh day, while Shanghai slumped 5.3% by the close.

Seoul closed 1.9% lower, Sydney shed 1.4% and Wellington gave up 2%. Hong Kong was down 2.1% in afternoon trade.

"The fall in the US stock market caused by surging crude oil prices and anxiety over outlook for the financial sector'' sparked the selloff in Asia, said Tsuyoshi Segawa, equity strategist at Shinko Securities.

A weak dollar was also weighing on Japanese exporters, he said.

European markets opened slightly lower, with London down 0.2% in early deals.

Investors took their cue from Wall Street where the Dow Jones dropped more than 3% Thursday to its lowest finish since September 2006 on worries that higher energy costs are hurting consumer spending and company profits.

Oil prices topped $US140 for the first time on Thursday after the president of the OPEC producer cartel, Algerian Energy Minister Chakib Khelil, forecast that prices could soon surge as high as $US170 a barrel.

Oil prices were easier in Asian trade Friday but later struck fresh record highs close to $US142 a barrel in Europe.

In Taipei a local interest rate hike added to the pressure on the market, with stocks sliding 3.4% to a near five-month low.

"Market confidence has been hurt badly. So, further weakness is possible over the next few trading sessions,'' Mega Securities analyst Alex Huang said.

Concerns over new share offers also weighed on Chinese shares as investors worried liquidity pressure would further impact the already weak stock market.

The securities regulator said late Thursday it would assess an application for initial public offerings in Shanghai by Everbright Securities and China South Locomotive and Rolling Stock Corp on Monday.

Indian shares plunged more than 4% in morning trade while Philippine share prices ended down 2.2%.

The downturn was caused by "Wall Street, inflation and high commodity prices,'' particularly oil, said Jose Vistan of AB Capital Securities Inc.

"Investors are worried about the rise of commodity prices, like oil. That rekindled inflationary concerns. Fund managers are concerned about the impact of inflation in Asia,'' he said in Manila.

The US dollar was slightly higher against other major currencies, clawing back some of the previous day's heavy losses.

The US dollar edged up to 107.16 yen in Tokyo afternoon trade from 106.73 in New York late Thursday. The euro slipped to $US1.5732 from $US1.5756 but firmed to 168.54 yen against 168.18.