SYDNEY (Reuters) – Asian stocks hit a two-week low on Wednesday, oil weakened further and the dollar approached a four-month high as the coronavirus stalled in Europe and potential US tax hikes hurt risk appetite, sparking a flight to safety.
MSCI’s widest index of Asia-Pacific stocks outside Japan fell 1% after falling 0.9% on Tuesday. It went as low as 676.46 points, a level last seen on March 9.
The index had a disappointing run in March after five consecutive months of gains, as risk-bearing assets were previously shaken by fears that inflation will pick up faster than expected, led by the successful rollout of the coronavirus vaccine and massive US fiscal stimulus.
Japan’s Nikkei stumbled 1.8%, while South Korea’s KOSPI fell 0.5%. Chinese stocks were in the red for the second day, while the blue-chip CSI300 index fell 1.2%. Hang Seng in Hong Kong slipped 1.7%.
On Wall Street, the Dow Jones Industrial Average fell 0.94% overnight, the S&P 500 fell 0.76% and the Nasdaq Composite fell 1.12%.
“The combination of increasing lockdowns across much of Europe, and some risk reduction in the EM space, led to a risky day when Treasuries rallied following a flight to quality bid,” John Briggs, Global Head of Strategy for NatWest wrote. in a note to customers.
Germany extended its lockdown until April 18. A US health agency said the AstraZeneca Plc vaccine, developed in conjunction with the University of Oxford, may have included outdated information in its data, further fueling investors’ concerns about the recovery.
“So unlike the day before, the reduction in risk appetite was the driving force today, which also led to broad USD strength in a flight to quality not only against EM but also against most majors,” added Briggs. .
In addition to investor woes, Treasury Secretary Janet Yellen told Congress on Tuesday that the U.S. economy remains in danger.
In currencies, the dollar index approached a four-month high of 92,506 against a basket of most major currencies. [FRX/]
The euro fell to a four-month low below $ 1.18355 – trading from $ 1.18360 – after Germany extended its lockdown. The safe-haven yen was generally stronger, and the Australian dollar – considered a liquid measure of risk – weakened further on Wednesday.
Benchmark 10-year notes rose 19/32 to return 1.6153% after Federal Reserve Chairman Jerome Powell downplayed inflation risk.
U.S. production data was expected later on Wednesday, and Powell was expected to give the same prepared testimony before a Senate bank panel.
The flight to safety hit commodity prices, although oil prices rose slightly on Wednesday as investors searched for bargains. Profits were capped, however, as lockdowns in Europe and an increase in US oil stocks constrained risk appetite and raised fears of oversupply. [O/R]
Brent crude oil futures fell 16 cents to $ 60.62 a barrel after falling 5.9% and reaching a low of $ 60.50 on Tuesday. West Texas Intermediate (WTI) Crude Oil Futures fell 21 cents to $ 57.55 after losing 6.2% the previous day.
Safe haven gold was higher at $ 1,731.2 an ounce.
Reporting by Swati Pandey in Sydney and Chris Prentice in Washington; Edited by Cynthia Osterman and Stephen Coates