HONG KONG (Reuters) – Asian stocks fell and the dollar rose on Wednesday after an explosion in Poland that Ukraine and Polish authorities said was caused by a Russian-made missile.
Concerns about a possible escalation of geopolitical tensions led to a 1% decline in MSCI’s broadest index of Asia-Pacific shares outside Japan. (.MIAPJ0000PUS).
Hong Kong Hang Seng Index (.HSI) Down 1.1% and the CSI 300 in China (.CSI300) It was down 0.4% by midday. A struggling real estate sector weighed on markets, as new home prices in China fell at their fastest pace in more than seven years in October, weighed down by COVID 19-related restrictions and problems across the industry.
US stock futures, the S&P 500 e-minis, fell 0.2%.
In early European trade, pan-regional Euro Stoxx 50 futures lost 0.9%, German DAX futures fell 1%, and FTSE futures fell 0.5%.
NATO member Poland said on Wednesday a Russian-made missile had killed two people in eastern Poland near Ukraine, and it recalled Russia’s ambassador in Warsaw for an explanation after Moscow denied responsibility.
“(It has put off what is a much more constructive tone in the markets over the past three or four days,” said Dwyvor Evans, head of macro strategy for Asia-Pacific at State Street Global Markets in Hong Kong. Inflation has slowed in the US.
US President Joe Biden said the US and its NATO allies are investigating the explosion, but preliminary information indicates that it may not have been caused by a missile fired from Russia.
“I think President Biden’s comment was clearly a representation of the US government,” said Quincy Crosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
“Unless there is evidence to the contrary, (market fears) should dissipate.”
The safe-haven US dollar pared gains against its major peers, but mostly remained higher, led by a 0.63% advance against the yen.
The British pound lost 0.32%, while the risk-sensitive Australian dollar weakened 0.34%. The euro was flat.
“There’s a lot of headlines going around the world today but there’s a sense that this isn’t going to happen, at this point … it’s escalating tensions, or at least there’s no desire to go in that direction,” said Rodrigo. Catrell, senior currency analyst at National Australia Bank in Sydney.
The fact that the Australian and New Zealand dollars held most of their big gains from Tuesday after weak readings of the risk-sensitive and pro-growth US PPI is an indication that “there is a lot of appetite to push the US dollar lower”. Catrell said.
The yield on the benchmark 10-year Treasury note rose to 3.8068% in Tokyo, compared to 3.799% at the close of US trading on Tuesday. It earlier fell to 3.757%, matching the lowest level during the previous session, which was the lowest since Oct. 6.
US crude fell 0.74% to $86.29 a barrel. Oil prices rose on Tuesday after news that oil supplies to Hungary via the Druzhba oil pipeline were temporarily halted due to low pressure.
Gold is down slightly, with spot gold trading at $1,778.17 an ounce.
Reporting by Xie Yu; Additional reporting by Ankur Banerjee. Editing by Edwina Gibbs and Edmund Kellman
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