As most Asia-Pacific stock markets look likely to end the week higher, Australia has underperformed with a noted drop in energy stocks.
Australia’s S&P/ASX 200 XJO, -0.15% , one of the worst-performing indexes in the Asia-Pacific region in 2017, closed down 0.1% to notch its sixth decline in eight sessions after having recently reached 10-year highs. While oil prices until Friday remained at a three-year best—crude fell 1% in Asian trading on worries about rising production—the energy sector slid 0.7% for the day and 4.5% for the week, the most since June.
The sector had risen 8.3% during a five-week winning streak.
The market seems to be signaling that the next move for oil is lower, resulting in investors pulling out of energy stocks ahead of any sharp fall in crude prices, said Michael McCarthy, CMC Markets’ chief market strategist in Australia. And with the earnings season looming, he added, investors are waiting to see how much the sector has profited from late 2017’s oil-price gains.
In the month before this week, the S&P 500 energy sector had jumped 12%, the best stretch since November 2011. But it’s down 1.2% this week.
Oil prices appear “a bit overextended after a 30% rally, with barely a move lower, over the past three months,” said Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management.
Meanwhile, most Asia-Pacific stocks remained modestly higher in afternoon trading after a slow Friday start, as investors largely ignored ongoing U.S. budget negotiations.
“Equities are the name of the game in Asia at the moment and it’s going to continue,” said Stephen Innes, head of trading in Asia at Oanda, in the wake of strong January gains in the region. “I’ve gone through several of these possible shutdowns and this is the most nonchalant attitude I have seen the market take.”
The House late Thursday passed a one-month spending bill intended to prevent a government shutdown this weekend. Democrats say they have the votes to block it in the Senate.
Gains in many Asian markets were within 0.2% of Thursday’s closing levels.
But Taiwan’s Taiex Y9999, +0.72% rose another 0.7% to fresh 28-year highs as it continues marching toward 1990’s record high, now 11% away. Helping was Taiwan Semiconductor 2330, +2.82% — the index’s biggest company. It jumped 2.8% to another record following its fourth-quarter report.
India’s Sensex 1, +0.73% also moved deeper into record territory, rising 0.5%. That benchmark is heading toward its 10th gain in the past 12 sessions.
The U.S. dollar stabilized in morning trading before resuming its selling; the Wall Street Journal Dollar Index BUXX, -0.26% was recently down 0.2% and near the week’s lowest level.
Tim Kelleher, head of institutional FX sales at ASB Bank in New Zealand, said the greenback will likely remain under pressure until the budget situation is resolved. “Most people expect it will get sorted before the deadline,” he added.
The Senate began considering the bill Thursday night. The first vote, to open debate on the measure, was supported by Democrats to buy more time to reach a better deal on immigration, a congressional aide said.