Weak commodities drag Asian markets

Asian share markets tumbled on Thursday after a second big sell-off in commodities in less than a week curbed investor appetite for riskier investments and boosted the U.S. dollar, while a short-lived recovery in oil prices was wiped out in late trade.

Global markets have been regaining ground since a near-record fall in commodities last week, but remain skittish as investors mull issues ranging from a possible Greek debt restructure to the extent of a cooling economy in China as it tackles inflation.

Weaker-than-expected growth data from China and an unexpected rise in gasoline stocks saw oil prices tumble more than 4% on Wednesday.

Oil prices initially recovered ground on Thursday as investors in Asia focused on strong demand growth. U.S. crude futures rose more than $1 but eased back in late trade to be flat around $98.18.

China's weaker-than-expected industrial output data led some investors to worry about a sharp slowdown and reduced demand for commodities, while others felt it would ease the need for further aggressive tightening.

Investor sentiment was also hurt by Cisco's warning that it will fare worse this quarter than analysts had feared, and unveiled plans for global job cuts as the group struggles to revive growth.

"Markets are worried about high commodity prices, higher inflation, lower consumer spending power, rising interest rates and potential downward GDP growth forecasts especially for Japan, the euro zone and the UK in the near future, while QE2 is coming to an end," said Derek Lawless, head of WorldSpread France.

Energy and resource stocks led Asian share markets lower with Japan's benchmark Nikkei 225 slipping 1.5% to 9,716. Hang Seng shed 1% to 23,074 while Shanghai markets dropped 1.3% to 2,845.

The euro was steady in Asia after falling to a six-week low against the yen and a three-week low versus the U.S. dollar on further speculation that Greece will eventually need to restructure its debt.

Already hurt by a sell-off in commodity linked currencies, the Australian dollar tumbled more than 1% to a one-week low after surprisingly weak Australian jobs data reduced market expectations of a rate hike.