Asian stocks fall to two-year low, euro approaches in line with dollar due to growth fears

HONG KONG, July 12 (Reuters) – Global equities faltered, oil fell and the euro approached parity with the safe haven dollar on Tuesday as the prospect of further austerity from central banks, renewed covid outbreaks in China and Europe’s energy shortages frightened investors.

MSCI̵[ads1]7;s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) fell 1.3% to its lowest level in two years, while Japan’s Nikkei (.N225) lost 2%.

Futures also pointed to a week open in the US and Europe, when US S&P 500 e-minis lost 0.6%, Nasdaq futures fell 0.7%, pan-region Euro Stoxx 50 futures fell 0.8% and FTSE futures fell 0.44%.

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The euro fell as low as $ 1,0005 against the US dollar, moving ever closer to parity for the first time since December 2002, as investors worry that an energy crisis will lead the region into a recession.

“Risk sentiment dominates global markets,” said Yuting Shao, macro strategist at State Street Global Markets.

“The dollar is the international reserve currency that goes to. So when there is a recession risk or there is volatility, the dollar is the currency people rush to because it is the safest,” Shao added.

The dollar index, which tracks the currency against a base of six peers, rose to 108.44, the highest since October 2002.

The focus for this week will be macro data including US consumer inflation on Wednesday, and comments from Federal Reserve officials as investors search for clues about the outcome of the Fed’s upcoming political meeting before officials enter the pre-meeting blackout period.

A high inflation reading will add pressure for the Fed to increase its already aggressive rate of interest rate increase.

Also high on investors’ list of concerns is the fact that a growing number of Chinese cities, including the Shanghai commercial hub, are using new COVID-19 curbs starting this week to curb new infections after finding a highly transmissible Omicron -subvariant. read more

In the early afternoon, Hong Kong’s benchmark Hang Hang (.HSI) index fell 1.21% to its lowest level since June 17, while mainland China’s blue chip CSI300 (.CSI300) lost 1.3%.

In addition, the rising energy costs in Europe are a major fear as the largest single pipeline carrying Russian natural gas to Germany went into annual maintenance, with flows expected to stop for 10 days.

Investors are worried that the shutdown could be prolonged due to the war in Ukraine, which further limits European gas supply and tilts the struggling eurozone economy into recession. read more

The yield on the benchmark index for 10-year government bonds was 2.9595%, after falling below 3% overnight when investors bought safe government bonds in the middle of a sale on Wall Street.

Fear of growth also weighed on oil, despite concerns about the tight supply.

Brent oil futures fell $ 1.35, or 1.3%, to $ 105.75 a barrel, while US West Texas Intermediate oil was at $ 102.64 a barrel, down $ 1.45, or 1.4%.

Gold was a little lower. Spot gold was traded at $ 1728.98 per ounce.

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