Singapore, April 28 - A surprise Chinese interest rate hike spooked Asian stocks and pushed oil prices lower on Friday, offsetting signs from the U.S. Federal Reserve that it may be about to pause its campaign for U.S. rate increases.
Gold prices rose after comments from Fed chief Ben Bernanke led investors to believe rate hikes may pause soon, and the U.S. dollar was stuck near a seven-month low against the euro. Asian shares reacted badly to China's move on fears it might restrict growth, falling from recent highs with exporters such as POSCO Co. Ltd., the world's fifth-biggest steel maker, hurting more than others.
Copper, however, rebounded nearly 1 percent on bargain hunting, a day after China's rate decision spurred a broad sell-off in the commodities sector.
China said its first rate increase in 18 months was aimed at tweaking the fast-growing economy and there was no need for more drastic measures, reinforcing analyst views that authorities will proceed cautiously despite booming investment and credit growth.
"Selling mounted as we've got the Golden Week holiday coming, in addition to concerns about a rise in Chinese interest rates and the currency market coming at the same time," said Yusuke Sakai, a manager of equities trading at Mizuho Securities.
European stocks were seen lower and spread betters in London were calling the FTSE 100, CAC 40, and DAX indexes between 2 and 15 points lower.
Japanese stocks fell as shares of Sony Corp. tumbled nearly 5.5 percent after it forecast a sharp profit decline in the current year and a generally stronger yen raised concern of a drop in earnings at exporters such as Kyocera Corp.
The Nikei posted its lowest close in a month ahead of full year results and outlooks by companies such as Mitsubishi Corp., Nippon Steel Corp., NTT DoCoMo Inc., Toshiba Corp. and Matsushita Electric Industrial Co. Ltd. after the market close.
KOREA STOCKS HAMMERED
China's rate rise to 5.85 percent from 5.58 hammered South Korean stocks, which fell more than 2 percent, but analysts said the impact was temporary.
Shares of Hyundai Motor Co., the country's biggest auto maker, extended losses from the previous day after prosecutors sought to arrest its chairman on charges of misusing company funds. Hyundai is yet to release first-quarter earnings which were due out on Thursday.
Samsung Electronics and LG Electronics were both down about 2 percent, partly also because of Microsoft's disappointing outlook.
"The effects of the Chinese move are not going to last long," said Lee Woo-hyun, an analyst at Kyobo Securities. "The fundamentals in the market are still positive, and the rising trend should resume, so this may be a one-day thing."
Australian shares shed nearly 1 percent, easing for a second straight day, as miners such as BHP Billiton Ltd. fell on concerns that China's move would slow demand for metals.
Hong Kong shares fell 1.27 percent, while the Hong Kong-listed shares of mainland companies lost 1.31 percent after China's rate rise.
GOLD RISES, OIL FALLS
Gold rose around $3 on fund buying after Bernanke's comments. Spot gold hit a high of $637.25 an ounce before retreating to $636.90/637.80 an ounce, still higher than $634.20/635.20 late in New York.
Oil, however, fell towards $70 a barrel, deepening a four-day drop from a record high, as China's rate rise could dampen strong demand from the world's second-largest oil consumer.
U.S. crude for June delivery was trading 27 cents down at $70.70 a barrel by 0613 GMT, adding to the previous day's 96-cent slump.
In the foreign exchange market, the yen inched down against the U.S. dollar despite a barrage of upbeat economic data that did little to alter expectations the Bank of Japan will raise interest rates later in the year.
The dollar stayed near a seven-month low versus the euro after Bernanke gave the clearest signal yet that the Fed's campaign of raising interest rates might be coming to an end.
As of 0530 GMT, the euro was little changed at $1.2530 near a seven-month peak of $1.2549 hit the previous day.
The dollar was trading around 114.35 yen up from 114.10 in late U.S. trade and compared with a three-month low of 113.83 hit on Thursday.