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 0.6%, South Korea's Kospi fell 0.8% and Japan's Nikkei Stock Average was flat. Hong Kong's Hang Seng Index fell 0.3%.

The Shanghai Composite Index rose 1.4% 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"We're seeing money withdrawn from these markets by U.S. based investors, " said Andrew Sullivan, managing director at Haitong Securities International.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--which regained some ground during Asian trading--and the prospect of higher U.S. interest rates are outweighing hopes for additional stimulus from the European Central Bank. Economists and market watchers expect the central bank to reduce its deposit rate further into negative territory and add to its EUR60 billion ($63.5 billion) a month bond-buying program after its meeting later Thursday.

The euro weakened to $1.0592 in afternoon trading, compared with $1.0614 late Wednesday in New York.

Energy shares on the S&P/ASX 200 dropped by 3% while materials stocks fell 2.2%. Miners BHP Billiton Ltd. and Rio Tinto Ltd. fell 3% and 2.1%, respectively. Woodside Petroleum Ltd. fell 3.8% and Oil Search Ltd. fell 2.2%.

Brent crude gained 1.4% to $43.10 in Asia Thursday after sliding 4.4% to a six-year low a day earlier.

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 market share against increased competition from the U.S., a policy that accelerated a price rout in oil.

Meanwhile, the dollar rose after Federal Reserve Chairwoman Janet Yellen said that the U.S. economy appeared to be strengthening, a signal the central bank could raise rates soon. Going forward, market participants will assess U.S. nonfarm payroll data on Friday.

The Wall Street Journal Dollar Index, which gauges the dollar against a basket of 16 currencies, last traded at 90.80 in Asia, after rising as high as 91.02 overnight, 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 on Wednesday. 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.

Iron-ore prices last traded at $40.60 a ton, as analysts expect they are likely to fall to fresh decade lows.

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 traded at $0.7317, relatively flat from Wednesday, when it reached its strongest level against the U.S. dollar 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 0.1% at $1,052.30 a troy ounce.

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

(END) Dow Jones Newswires

December 03, 2015 03:24 ET (08:24 GMT)

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