Yemen conflict weighs on Asian stock markets as Tokyo index slips on weak data

Markets Associated Press

Asian shares were lackluster Friday as the conflict in Yemen ripped through the Middle East and Japanese data showed the world's No. 3 economy is still in the doldrums.

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KEEPING SCORE: Japan's Nikkei 225 fell 1.3 percent to 19,213.15 and South Korea's Kospi was down 0.3 percent at 2,016.94. Hong Kong's Hang Seng fell 0.1 percent to 24,474.82. Australia's S&P/ASX 200 rose 0.7 percent to 5,919.90. Taiwan's benchmark fell and markets in Southeast Asia were flat.

JAPAN DATA: Lackluster inflation, wages and household spending data for February are adding to expectations that the central bank may resort to further monetary stimulus to spur growth. Core inflation excluding volatile food prices was 2.0 percent in February, down from 2.2 percent in January. Excluding the impact of an April 2014 sales tax hike, inflation was flat, suggesting the world's No. 3 economy is still struggling after a recession last year.

MIDDLE EAST: The turmoil in Yemen has erupted into a regional conflict, with Saudi Arabia and its allies bombing Shiite rebels allied with Iran, while Egyptian officials said a ground assault will follow the airstrikes. Iran denounced the Saudi-led air campaign, saying it "considers this action a dangerous step." The military action has turned impoverished and chaotic Yemen into a new front in the rivalry between Saudi Arabia and Iran.

THE QUOTE: "All eyes turn to the Middle East as conflict in Yemen stands as a stark reminder of the one-sided nature of the geo-political risks to asset markets," said Michael McCarthy, chief strategist at CMC Markets in Sydney. "Higher oil and gold prices, and lower share markets, are the inevitable result of the return of risk as the potential for armed conflict escalates," he said in a market commentary.

ENERGY: Oil prices dropped after two days of sharp gains triggered by the conflict in Yemen, which raised concerns that supplies of crude from the Persian Gulf region could be disrupted. Benchmark U.S. crude slipped $1.12 to $50.31 a barrel in electronic trading on the New York Mercantile Exchange. The futures contract gained $2.22, or 4.5 percent, to close at $51.43 a barrel on Thursday. Brent crude, a benchmark for international oils, was down $1.04 at $58.15 a barrel in London.

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WALL STREET: Conflict in the Middle East and the rapid ascent of the U.S. dollar are causing companies to pull back their profit forecasts, putting investors on edge and taking shares lower after they hit record highs earlier in the month. The Dow Jones industrial average lost 40.31 points, or 0.2 percent, to 17,678.23, while the Standard & Poor's 500 index lost 4.90 points, or 0.2 percent, to 2,056.15.

CURRENCIES: The U.S. currency has appreciated 8 percent in the past three months, a trend that tends to make U.S.-made goods more expensive abroad. On Friday, the euro rose to $1.0883 from $1.0880 in the previous session. The dollar was flat at 119.19 yen.