SYDNEY (Reuters) – Asian equities hit a two-week low on Wednesday, oil weakened further and the dollar reached four-month highs as coronavirus locks in Europe and possible U.S. tax hikes hit risk appetite, leading to a flight to safety.
MSCI’s broadest index of Asia-Pacific stocks outside Japan fell 1% after falling 0.9% on Tuesday. It dropped as low as 676.46 points, a level last seen on March 9th.
The index had a disappointing run in March after five consecutive months’ gains, as risk assets were stimulated earlier by fears that inflation would increase at a faster pace than expected, led by successful coronavirus deployment. vaccines and massive U.S. fiscal stimulus.
The Japanese Nikkei stumbled 1.8% while the South Korean KOSPI slipped by 0.5%. Chinese stocks were in the red for a second day with the CSI300 index of the blue chip 1.2% lower. Hang Seng in Hong Kong rose 1.7%.
On Wall Street, the Dow Jones industrial average fell 0.94% overnight, the S&P 500 0.76% and the Nasdaq Composite 1.12%.
“The combination of increasing locks in large parts of Europe, and some reduction in risk in the EM space, has led to a risk day where the treasury has risen due to a flight-to-quality offering “” John Briggs, Global Strategic Head of NatWest, wrote in a note to clients.
Germany extended its exclusion until 18 April. A US health agency said the AstraZeneca Plc vaccine, developed with the University of Oxford, may have contained outdated information in its data, further fueling investors’ concerns about the recovery.
“So, unlike the previous day, reducing risk appetite today was the driver, which also led to a broad USD force in a flight-to-quality move, not only against EM, but also against most majors, “Briggs added.
Treasury Secretary Janet Yellen told Congress Tuesday that the U.S. economy is in jeopardy.
In currencies, the dollar index approached a four-month high of 92,506 against a basket of the most important currencies. [FRX/]
The euro reached a four-month low below $ 1.18355 – trading as low as $ 1.18360 – after Germany extended its exclusion. The safe haven yen was generally stronger, and the Australian dollar – which is considered a liquid proxy for risk – weakened further on Wednesday.
Benchmark 10-year notes rose 19/32 in price to 1.6153% after Federal Reserve Chairman Jerome Powell downplayed the risk of inflation.
U.S. manufacturing data would be available later Wednesday and Powell would be expected to give the same prepared evidence to a Senate’s panel.
The flight to safety hit commodity prices, although oil prices rose higher on Wednesday as investors sought bargains. However, gains have been limited, as gains in Europe and an increase in US crude shares have curtailed risk appetite and raised fears of oversupply. [O/R]
Brent crude futures fell 16 cents to $ 60.62 a barrel after tumbling 5.9% on Tuesday, hitting a low of $ 60.50. West Texas Intermediate (WTI) crude futures fell 21 cents to $ 57.55, losing 6.2% the previous day.
Safe haven gold was higher at $ 1,731.2 per ounce.
Reporting by Swati Pandey in Sydney and Chris Prentice in Washington; Edited by Cynthia Osterman and Stephen Coates