TOKYO (Reuters) – Asian stocks fell the most in three weeks on Wednesday after U.S. lawmakers called for an impeachment inquiry into President Donald Trump, increasing the prospects of prolonged political uncertainty in the world’s largest economy.
The dramatic move by Democrats in the House of Representatives compounded investors’ anxieties with confidence already shaken by U.S.-China trade tensions and global recession risks.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.86%, the biggest decline since Sept. 3, while Tokyo’s Nikkei slipped 0.39% for its largest loss in three weeks. Australian shares fell 0.54%.
The downturn in Asia extended to Europe, with Euro Stoxx 50 futures off 0.20%, those for Germany’s DAX down 0.30% and FTSE futures off 0.26%.
Chinese shares slumped and the offshore yuan fell, while oil futures extended declines after Trump harshly criticized Beijing’s trade practices in a speech at the United Nations, damping hopes for a resolution to the U.S.-China trade war.
“The impeachment probe has put a dent in Asian shares,”
said Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Kokusai Asset Management Co in Tokyo.
“Chinese shares were already exposed to downside risks.
Trump’s comments likely increased those risks.
There are worries about U.S. consumer sentiment.
There are also concerns that China’s economic slowdown hasn’t stopped.”
Sterling fell against the dollar, giving up some of its overnight gains, as persistent uncertainty over how Britain will complete its divorce from the European Union dogged the pound.
On Tuesday, the UK Supreme Court ruled that Boris Johnson’s decision to shut down parliament in the run-up to Brexit was unlawful, a stinging judgment that undermined the prime minister’s already fragile grip on power.
U.S. stock futures rose 0.19% in Asia on Wednesday, but those gains didn’t translate into better sentiment for regional share markets.
The push for an impeachment inquiry and disappointing U.S. economic data weighed on Wall Street on Tuesday, driving the S&P 500 0.84% lower, its biggest daily decline in a month.
The U.S. House of Representatives will launch a formal impeachment inquiry over whether Trump sought help from Ukraine to smear former Vice President Joe Biden, a front-runner for the 2020 Democratic presidential nomination. Trump has denied the claims.
It is unlikely that the impeachment inquiry would lead to Trump’s removal from office. Even if the Democratic-controlled House voted to impeach Trump, the Republican-majority Senate would have to take the next step of removing him from office after a trial.
“If an impeachment inquiry looks like ending his re-election chances in 2020,
he may throw caution to the wind and harden his attitude to a China trade deal,
increasing the chances of a global recession next year,”
said Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA.
The dollar index measuring the greenback against a basket of six major currencies was 0.20% higher.
Chinese shares fell 0.55% while shares in Hong Kong skidded by 1.01%.
In the offshore market, the dollar rose 0.17% to 7.1184 yuan.
Trump said on Tuesday Beijing had failed to keep promises it made when China joined the World Trade Organization in 2001 and was engaging in predatory practices that had cost millions of jobs in the United States and other countries.
U.S. crude dipped 0.59% to $56.95 a barrel. Brent crude fell 0.82% to $62.58 per barrel.
The U.S.-China trade war, which has dragged on for more than a year, has added pressure on China’s already slowing economy and has increased the risk of recession in other countries. Slower global growth would hurt demand for energy and other commodities.
Sterling traded at $1.2465, down 0.26%, having trimmed some of its overnight gains made following the UK court ruling.
In response to the UK Supreme Court’s decision, Johnson said he disagreed and vowed that Britain would leave the EU by Oct. 31 deadline, come what may.
The yield on benchmark 10-year Treasury notes rose to 1.6576%, while the two-year yield rose to 1.6216%.
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