Asia drops as White House turmoil hits risk sentiment, dollar bruised

Asia drops as White House turmoil hits risk sentiment, dollar bruised

Wall Street stocks were in the red all day as reports that Mr Trump asked former Federal Bureau of Investigation chief James Comey to stop a probe into ex-national security advisor Michael Flynn over his contacts with Russian Federation stoked questions about how an embattled White House will advance tax cuts and other growth measures that have boosted stocks.

And this report came just a day after The Washington Post reported Trump revealed "highly classified" information to Russia's foreign minister.

Optimism over the Trump administration's pro-growth policies had driven a sharp rally in USA stocks since his election in November.

The Dow fell 372 points, or 1.78 percent, to close at 20,606, while the S&P lost 43 points, or 1.82 percent, to hit 2,357, marking both indices' worst single-day performance since September 9.

Brent crude settled 56 cents firmer at $52.21, a 1.1 percent gain, while USA light crude closed 41 cents higher at $49.07, its highest close since April 28. ​ Gold rose to a two-week high on Wednesday as political turmoil in the United States reduced expectations of aggressive interest rate rises this year, pushed down US bond yields and drove the dollar to its lowest in six months.

And as Bespoke Investment Group pointed out in an email early Wednesday, the market reacting negatively to Trump-related headlines is a definite change in character from what we've become accustomed to in recent months. "I hope you can let this go", Trump told the Federal Bureau of Investigation director, according to a Comey memo, as cited by the New York Times. The VIX last week closed at 9.77, its lowest close since December 1993.

Bank stocks, which outperformed in the post-election rally, were the worst hit on Wednesday. The S&P 500 financial sector tumbled 3 percent.

The region-wide Stoxx Europe 600 Index, the broadest measure of share prices, was marked 0.34% lower by 08:30 BST, the biggest decline in almost a month, with bank and financial sector stocks leading the declines.

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Several money managers said they were not yet likely to change their portfolios as a result of the latest White House news.

"The bigger picture here is it puts another dent in the likelihood of getting a congressional majority to pass Trump's agenda", R.J. Grant, director of equity trading at KBW Inc., told The Wall Street Journal.

The dollar also slumped against other major rivals, with the ICE Dollar IndexDXY, -0.13% dropping to its lowest level since the day after the US presidential election to hit an intraday low of 97.86.

Oil blues: Oil prices pared back from its recent rally, after the American Petroleum Institute late Tuesday reported a climb of 882,000 barrels in USA crude supplies for the week ended May 12.

U.S. Treasury yields rose from one-month lows as stocks recovered from Wednesday's dramatic drop, reducing demand for safe-haven bonds.

Safe-haven gold hovered near a two-week high prompted by the weaker dollar and the risk aversion gripping the broader markets.

Elsewhere, Australia's S&P/ASX 200 was down 1.2%, while Korea's Kospi declined 0.5% and Singapore's Straits Times Index also lost 0.5%.

Adding to market jitters across the Americas, Brazilian stocks triggered a 30-minute circuit breaker after the benchmark Bovespa index fell 10 percent following a report President Michel Temer gave his blessing to an attempt to pay to silence a potential witness in the country's biggest-ever graft probe.