SYDNEY (Reuters) – Asian stocks hit a two-week low on Wednesday, oil fell further and the dollar approached four-month highs as coronavirus blockages in Europe and potential US tax increases hit risk appetite , leading to a safe escape.
The largest MSCI index of Asia-Pacific equities outside Japan fell 1% after falling 0.9% on Tuesday. It went up to 676.46 points, a level last seen on March 9.
The index performed disappointingly in March, after five consecutive months of gains, as risk assets were frightened earlier by fears that inflation would rise faster than expected, driven by the successful launch of the coronavirus vaccine and massive US tax incentive.
Japan’s Nikkei fell more than 1.8%, while KOSPI in South Korea fell 0.5%. Chinese equities remained in the red for the next day, with the CSI300 blue-chip index falling 1.2%. Hong Kong’s Hang Seng slipped by 1.7%.
On Wall Street overnight, the Dow Jones industrial average fell 0.94%, the S&P 500 lost 0.76%, and the Nasdaq Composite fell 1.12%.
“The combination of growing blockages in much of Europe and a reduction in risk in the EM space has led to a risky day when treasuries have gathered behind a quality flight offer,” said John Briggs, chief global strategy as NatWest wrote in a note to customers.
Germany extended its blockade until April 18. A US health agency said the AstraZeneca Plc vaccine, developed in conjunction with Oxford University, could have included outdated information in its data, further fueling investors’ concerns about recovery.
“So, unlike the previous day, the reduction in risk appetite was the reason for today, which also led to the consolidation of the value of the USD in a flight to quality, not only against EM, but also against most majorities. Briggs added.
In addition to investor trouble, Treasury Secretary Janet Yellen told Congress on Tuesday that the US economy remained in jeopardy.
In currencies, the dollar index approached a four-month high of 92,506 against a basket with most major currencies. [FRX/]
The euro moved below $ 1.18355 for four months – trading up to $ 1.18360 – after Germany extended its blockade. The safe haven yen was generally stronger, and the Australian dollar – considered a liquid proxy for risk – continued to weaken on Wednesday.
10-year benchmarks rose 19/32 in price to 1.6153% after Federal Reserve Chairman Jerome Powell downplayed inflation.
US production data was due to come later Wednesday, and Powell was expected to give the same prepared testimony to a Senate banking group.
The flight to safety hit commodity prices, although oil prices rose on Wednesday as investors sought bargains. However, gains have been limited, as bottlenecks in Europe and rising US oil stocks have curbed risk appetite and raised fears of overburdening. [O/R]
In the long run, crude oil fell 16 cents to $ 60.62 a barrel, after falling 5.9 percent to a low of $ 60.50 on Tuesday. West Texas Intermediate (WTI) crude futures fell 21 cents to $ 57.55, down 6.2% from 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; Editing by Cynthia Osterman and Stephen Coates