Stocks gain, dollar slips.
Asian stocks gained, while the U.S. dollar was under pressure on Wednesday finding little support from a rise in bond yields, as investors fretted about the fiscal outlook of major developed economies and the lack of progress on trade deals.
Oil prices rose more than 1% after a CNN report said that Israel was preparing a strike on Iranian nuclear facilities, raising supply concerns out of the key Middle East producing region and bringing geopolitical concerns back into focus. [O/R]
Investor sentiment has been fragile since Moody’s last week downgraded U.S. credit rating, stoking worries about the country’s $36 trillion debt pile, with U.S. President Donald Trump pushing for tax cuts that could worsen the debt load by $3 trillion to $5 trillion.
There are also concerns about a lack of progress on U.S. trade talks with foes and allies pressing Washington to ease or eliminate its tariffs.
U.S. stock futures indicated a lower open on Wall Street, while European futures pointed to a muted open.
Treasury yields have stayed elevated, with the yield on 30-year Treasury bonds hitting 5% in Asian hours. That brought no respite to the dollar as investors flocked to safe haven currencies including the yen and the Swiss franc.
Asia FX gains.
Most Asian currencies rose on Wednesday as the U.S. dollar weakened on uncertainty over President Donald Trump’s tax cut bill and investor caution amid the ongoing G7 finance ministers’ meeting, which often focuses on forex issues.
Back in Asia, investors assessed Japan’s weak trade balance data, reflecting the effect of U.S. tariffs. Markets also digested signs of deteriorating sentiment around U.S.-China trade.
Dollar weakens amid Trump’s tax bill uncertainty, G7 meeting
The US Dollar Index, which measures the greenback against a basket of major currencies, fell 0.3%, while Dollar Index Futures slid 0.4% in Asia hours.
Media reports showed that President Donald Trump on Tuesday urged congressional Republicans to rally around a broad tax reform bill, but he appeared unable to win over several dissenting lawmakers.
Oil gains as reports Israel may attack Iran.
Oil prices gained more than 1% on Wednesday after reports of Israel preparing a strike on Iranian nuclear facilities raised fears that a conflict could upset supply availability in the key Middle East producing region.
Brent futures for July rose 68 cents, or 1.04%, to $66.06 a barrel, by 0630 GMT. U.S. West Texas Intermediate crude futures for July climbed 70 cents, or 1.1%, to $62.73.
New intelligence obtained by the United States suggests that Israel is preparing to strike Iranian nuclear facilities, CNN reported on Tuesday, citing multiple U.S. officials familiar with the matter.
It was not clear whether Israeli leaders have made a final decision, CNN added, citing the officials.
“Such an escalation would not only put Iranian supply at risk, but also in large parts of the broader region,” said ING commodities strategists on Wednesday.
Iran is the third-largest producer among the members of the Organization of the Petroleum Exporting Countries and an Israeli attack could upset flows from the country.
There are also concerns Iran could retaliate by blocking oil tanker flows through the Strait of Hormuz choke point in the Gulf, through which Saudi Arabia, Kuwait, Iraq and the United Arab Emirates export crude oil and fuel.
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