Asia report: Most markets follow drop in oil on Tuesday

The global rally came to a roadblock in Asia on Tuesday, as oil prices fizzled from their US highs overnight and most markets in the region finished in the red.

They had started the day higher, after a good session for oil and equities in New York led to to the Dow Jones Industrial Average gaining 1.4% on Monday.

In China, the Shanghai Composite Index finished down 0.8% to 2,903.33. It had been down as much as 1.8% during the session, but ended the day above the key 2,900-point level.

Over in Hong Kong, the Hang Seng Index slid 0.25% to 19,414.78, and in Tokyo the Nikkei Stock Average lost 0.37% to 16,052.05.

HSBC lowered its year-end forecasts for the Chinese and Hong Kong bourses on Tuesday, saying it now expected the Shanghai Composite to rise to 3,200, down from a previous forecast of 3,900.

The bank was now picking a 21,000-point end to 2016 on the Hang Seng Index, down from 24,500. It cited lower earnings projections and expectations for increased volatility in the markets as behind its revisions.

Down under, the S&P/ASX 200 finished down 0.43%, closing below the psychologically important 5,000-point mark. It had closed on Monday above that point for the first time in three weeks.

After racing ahead in US trading overnight, oil continued to slip after Asian trading on Tuesday. Brent crude was last down 1.91% to $34.04 per barrel, and West Texas Intermediate was down 2.17% to $32.68.

That decline led to energy shares in Australia slipping 0.5%. The country's largest refiner, Woodside Petroleum, closed down 0.11%, and Oil Search dipped 3.03%.

"As the markets shake off one of the worst starts to the year on record, the risk-reward points to the upside in exploring oil-related plays," an analyst report from Jefferies explained.

The report also pointed to the fact oil prices had been leading stocks in Asia so far this year.

BHP Billiton was an exception to the rule in Australia, rising 2.62%. Bargain-hunting was purportedly behind the rise, with a number of the Asia's most hurt stocks seeing gains.

The mining giant's stock had lost 42% in the last 12 months, and it announced on Tuesday that it was slashing its dividend, which didn't appear to quell the bargain buying.

In Singapore, shares in Noble Group gained 1.4% after the commodities trader said it was recording a one-time writedown of $1.2bn (£850m) due to the collapse in raw materials prices.

New Zealand shares - which have the earliest session in Asia - followed Wall Street's lead, and the S&P/NZX 50 closed 0.6% higher. It was led by accounting software firm Xero, which rose 3.7% after attracting fresh funding from US investors.

The general volatility seen from day-to-day in the region had many worried. "There are still concerns that unexpected events could hit stocks," said Takashi Hiratsuka, a trading group leader at Resona Bank.

He also pointed to the possibility of Brexit as a destabiliser for the European trading bloc, after London mayor and Tory MP Boris Johnson threw a spanner in the works by supporting the leave camp on Monday, sending sterling south.

In currencies, the safe-haven yen advanced against the greenback, gaining 0.86% to JPY 111.95. The Aussie also gained by 0.11%, to AUD 1.3822, though the Kiwi slipped back 0.14% to NZD 1.4949.

A battered sterling was also having a poor day in the region. It was last down 1.13% to JPY 157.949. The colonial currencies advanced as well - the pound lost 0.39% to AUD 1.9504, and was off 0.1% to NZD 2.11.