Oil, Asia shares see subdued end to year dominated by Fed, China

Asian share markets looked set to end a rough, volatile year on a subdued note on Thursday as a renewed slide in oil prices sapped sentiment, a baleful trend that shows every sign of lingering into 2016.

European markets were also poised for a sluggish finish to 2015, with financial spreadbetters expecting to open down about 0.3% and France’s CAC40 to be about 0.1% lower on Thursday. Germany is closed.

The pan-European FTSEurofirst 300 index .FTEU3, which closed down 0.5% on Wednesday, is on track for a gain of 5.6% in 2015.

The relentless decline in oil prices, which have slumped as much as 35% this year, has hit currencies of commodity-rich countries including the Russian rouble, Canadian dollar, Norwegian crown, Brazilian real and Mexican peso.

While cheaper fuel is a boost to consumer spending power in much of the developed world, it is also a disinflationary force that reinforces bets on loose monetary policy in Europe, Japan and China, even as the Federal Reserve proceeds with glacial US tightening.

Oil prices are ending the year how they began – under pressure. Brent crude skidded toward 11-year lows after an unusual build in US stockpiles and signs Saudi Arabia will keep adding to the global oil glut.

“Ever get the feeling that you’ve been here before?” wondered analysts at National Australia Bank in a note to clients.

“It is the end of another year with oil prices very weak – having fallen by around a third again since the summer – China fears are at the fore and everyone is still talking about the Fed.”

US crude futures CLc1 gained 0.2% to $ 36.67 a barrel, after a drop of 3% the previous session. They are on track for a 31% loss this year.

Brent crude LCOc1 rebounded 0.4% to $ 36.60, after a 3.5% drop in the previous session. It’s set for a slump of 36% for 2015.

That was bad news for most commodity currencies. The dollar hit a more than one-year high against the Russian rouble RUB=, and its highest in at least 13 years against the Norwegian crown <NOK=.

Among widely-trade currencies, the five worst-performing ones this year have been the Argentinian peso ARS= and Brazilian real BRL=, with losses of more than 30% versus the dollar, then the South African rand ZAR=, Turkish lira TRY= and the Russian rouble, which have tumbled more than 18%.

The Australian and New Zealand dollars have had the biggest losses among Asia Pacific currencies. The Aussie AUD=D4 slipped about 0.1% to $ 0.7296, extending losses this year to almost 11%. The kiwi NZD=D4 held steady at $ 0.6845, on track for a 12.3% decline in 2015.

The Chinese yuan is heading for a record yearly loss of 4.7% against the dollar after further weakening this week, driven by the typical year-end increase in demand for US dollars in China’s foreign exchange market.

The yuan traded close to the official mid-point rate CNY=SAEC of 6.4936 per dollar set by the People’s Bank of China on Thursday, the weakest level since May 2011 and 0.1% weaker than the previous fix of 6.4895.

Some traders forecast the Chinese currency could slip as far as 6.80 to the dollar by the end of 2016.

“China and the United States will continue their monetary policies’ tones in 2016, which would boost the dollar and exert downward pressure on the yuan,” said a dealer at an Asian bank in Shanghai.

Moves between the majors were limited.

Against a basket of currencies, the dollar was flat at 98.229. It was also steady on the yen at 120.43 JPY=D4, while the euro marked time at $ 1.0931 EUR=D4.

Holidays limited the damage in Asian markets on Thursday with many either closed or shutting early. Japan was one of the markets off on Thursday, though it was also one of the better performers this year with gains of almost 10% for the TOPIX.

Others have not fared so well. MSCI’s broadest index of Asia-Pacific shares outside Japan rose about 0.1%, but was set to end the year 12% lower.

Australia’s main index closed down 0.5%, widening losses for 2015 to 2.1%.

China’s Shanghai Composite index and CSI300 both slipped about 0.4% on Thursday. Despite a savage summer rout which rocked global markets, China had the region’s best performing emerging market indexes in 2015, with the former set for a gain of 10% and the latter 6.1%.

While 2016 is expected to be another volatile year for mainland stocks, with major concerns including when the economy will bottom and a potential equity supply glut, market watchers expect less drama than in 2015.

Thailand and Indonesia .JKSE, both of which were closed Thursday, were the worst performing Asian emerging markets this year, with losses of 14% and 12.1%, respectively.

New Zealand was the best-performing Asia-Pacific developed market, with gains of 13.5%, and Singapore was the worst, with a 14% loss.

The next major Asian event will be official readings on Chinese manufacturing and services in December, due on 1 January Activity in China’s manufacturing sector is expected to have contracted for a fifth straight month, a Reuters poll showed, likely consigning the world’s second-largest economy to its slowest annual growth rate in 25 years.

Losses in energy stocks weighed on Wall Street on Wednesday, where the Dow .DJI ended down 0.66%. The S&P 500 fell 0.72% and the Nasdaq.

Apple was the single biggest drag, falling 1.31% on fears of potentially soft iPhone sales.