Asian stocks slip, the dollar soars in flight towards security

SYDNEY (Reuters) – Asian stocks hit a two-week low on Wednesday, oil weakened further and the dollar approached four-month highs as coronavirus blockages in Europe and possible taxes in the United States affected the appetite for risk, leading to a flight to security.

MSCI’s broader Asia-Pacific stock index outside of Japan fell 1% after falling 0.9% on Tuesday. It dropped to 676.46 points, a level last seen on March 9th.

The index has had a disappointing performance in March after five consecutive months of gains, as risk assets were previously frightened by fears that inflation would rise at a faster pace than expected, thanks to success of the implantation of the coronavirus vaccine and the massive US fiscal stimulus.

The Japanese Nikkei stumbled 1.8%, while the South Korean KOSPI fell 0.5%. Chinese stocks were in the red for a second day, with the blue-low CSI300 index up 1.2%. Hong Kong’s Hang Seng suffered 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 blockades across much of Europe and some risk reduction in the EM space, led to a risky day when Treasury met after a quality offer,” said John Briggs , head of global strategy as NatWest wrote in a note to clients.

Germany extended its closure until April 18. A U.S. health agency said the AstraZeneca Plc vaccine developed with Oxford University could have included outdated information in its data, further fueling investors’ concerns about recovery.

“So, unlike the previous day, reducing risk appetite was the engine today, which also led to a strength of the USD in a measure of flight to quality, not only against MS, but also against most major companies, ”Briggs added.

In addition to investor problems, Treasury Secretary Janet Yellen told Congress Tuesday that the U.S. economy was still at risk.

In foreign currencies, the dollar index stood at a four-month high of 92,506 against a basket of most major currencies. [FRX/]

The euro advanced below $ 1.18355 for less than four months – trading at $ 1.18360 – after Germany extended its close. The safe haven yen was largely strong, and the Australian dollar, considered a liquid net asset value, weakened even further on Wednesday.

The 10-year benchmark banknotes rose 19/32 in price to 1.6153% after Federal Reserve Chairman Jerome Powell downplayed the risk of inflation.

U.S. manufacturing data was due to be delivered later Wednesday and Powell was expected to give the same prepared testimony to a Senate banking panel.

The flight to safety hit commodity prices, though the price of oil rose on Wednesday as investors sought deals. Gains were limited, however, as blockades in Europe and rising US crude stocks curbed risk appetite and raised supply fears. [O/R]

Brent crude futures fell 16 cents to $ 60.62 a barrel, after falling 5.9% to a low of $ 60.50 on Tuesday. West Texas Intermediate (WTI) crude futures fell 21 cents to $ 57.55, after losing 6.2% the day before.

The safe haven gold was over $ 1,731.2 an ounce.