US share futures and the dollar slipped in early Asian trade on Wednesday after reports that President Donald Trump asked then-FBI Director James Comey to end a probe into his former security adviser.
European stocks open lower as global investors pull back from both risky assets and the USA dollar amid the ongoing political scandal in the White House that threatens to engulf President Donald Trump's nascent administration.
The Dow Jones Industrial Average fell 370.12 points, or 1.76%, to 20,609.63, the S&P 500 lost 43.35 points, or 1.81%, to 2,357.32 and the Nasdaq Composite dropped 158.63 points, or 2.57%, to 6,011.24.
"In almost any time but the present, this is the type of escalating scandal that would jolt financial markets".
"The market has come alive with the dynamic of volatility, which will no doubt be welcomed by numerous shorter-term traders out there", Chris Weston, chief market strategist at IG Markets in Melbourne wrote in note.
"Rising doubts about USA political leadership should fuel further rotation into Europe".
In commodity markets, which have also been highly volatile in recent weeks but due mainly to supply and demand issues, there were steadier signals. In fact, the broadest index of Asia-Pacific shares outside Japan- MSCI's broadest index reduced by 0.3 percent and Japan's own index Nikkei i.e. N225 declined by 0.5 percent. Hong Kong's technology sector, for example, is the most expensive, trading at a price-to-earnings multiple of more than 42 times. But now we have worries about the Trump Administration.
The Philippine Stock Exchange Index was down 0.88 percent to 7,757.69.
That was followed late Tuesday by claims by recently fired Federal Bureau of Investigation boss James Comey that Trump pressed him to drop a probe into ex-national security advisor Michael Flynn over his links to Moscow.
The White House quickly denied the New York Times report, saying in a statement it was "not a truthful or accurate portrayal of the conversation between the president and Mr. Comey".
The U.S. currency dropped 1.4% against the Japanese yen on Wednesday.
It last stood at 97.588, flat from late US trade, and down more than 2 percent over the past four sessions.
Gold, a safe-haven investment, rose by over one percent in the European afternoon. U.S. West Texas Intermediate (WTI) crude futures were up 0.4 percent at $49.03 per barrel. Against the euro, it edged up to 1.0917 per euro versus Friday's eight-month high of 1.0987.
The greenback climbed to a 13-year high after US President Donald Trump won the election in early November, and hit 103.01 in December.
The euro zone GDP grew 0.5 percent in January-March, in line with expectations, and underscoring a recovery in the currency bloc.
The greenback also came under pressure after weak US housing data on Tuesday added to a recent run of disappointing economic reports and underlined uncertainty over the monetary policy outlook. The dollar bought 112.14 yen, compared with 113.12 yen on Tuesday.
The data came after Friday's softer than expected retail sales and inflation. Though the White House has denied the allegation, there's mounting unease in markets over the developments in the US government.
"Everything happening in Washington is likely to if not derail, at least delay what the market expectation has been about significant tax reform and tax reduction", said David Lafferty, chief market strategist at Natixis Global Asset Management.
Germany's benchmark 10-year Bund yield fell to a two-week low and US Treasury yields were flat having dropped as far as 2.2120 per cent the previous day, which had been a one-month low.
Oil prices more than recouped yesterday's losses when they fell after the weekly API inventory numbers showed a surprise build in U.S. crude stocks.