SYDNEY, March 24 (Reuters) – Asian stocks hit their biggest two-week low on Wednesday, oil weakened further and the dollar approached its biggest four-month high as coronavirus blocks in Europe and possible tax hikes in the US have hit risk appetite, leading to a flight to safety.
The broader MSCI index for Asia Pacific stocks outside Japan fell 1%, after falling 0.9% on Tuesday. It dropped to 676.46 points, a level last seen on March 9th.
The index performed disappointingly in March, after five consecutive months of gains, as risky assets were previously frightened by fears that inflation would rise at a faster than expected pace, led by successful vaccine launches. against coronavirus and massive US fiscal stimulus.
Japan’s Nikkei fell 1.8%, while South Korea’s KOSPI fell 0.5%. Chinese stocks were in the red for the second day, with the blue chip chip CSI300 down 1.2%. Hong Kong’s Hang Seng fell 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 increasing blockages across much of Europe and some risk reduction in the EM space led to a risk-free day when Treasury bills recovered after a flight offer for quality,” John Briggs, global head of strategy for NatWest wrote in a note to customers.
Germany extended its blockade until April 18. A US health agency said the AstraZeneca Plc vaccine developed with the University of Oxford may have included outdated information in its data, further fueling investors’ concerns about the recovery.
“So, unlike the previous day, the reduction in risk appetite was the determining factor today, which also led to a broad USD strength in a flight movement for quality, not only against MS, but also against most of big companies, ”added Briggs.
To make matters worse for investors, Treasury Secretary Janet Yellen told Congress on Tuesday that the US economy remains at risk.
In currencies, the dollar index approached the four-month high of 92.506 against a basket of major currencies.
The euro fell towards a four-month low below $ 1.18355 – being traded at a low of $ 1.18360 – after Germany extended its blockade. The safe haven yen was broadly stronger, and the Australian dollar – considered a net proxy for risk – weakened further on Wednesday.
The 10-year benchmark notes rose 19/32 in price, to yield 1.6153%, after Federal Reserve Chairman Jerome Powell minimized the risk of inflation.
US industry data was released on Wednesday and Powell is expected to give the same testimony prepared for a panel of Senate banks.
The flight to safety hit commodity prices, although oil prices rose on Wednesday as investors looked for bargains. The gains were limited, however, as blockages in Europe and an increase in U.S. oil stocks reduced appetite for risk and heightened fears of oversupply.
Brent 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 futures fell 21 cents to $ 57.55, having lost 6.2% the previous day.
Safe Harbor gold rose to $ 1,731.2 an ounce. (Reporting by Swati Pandey in Sydney and Chris Prentice in Washington; Editing by Cynthia Osterman and Stephen Coates)