Asian stocks fell on Wednesday after legislators in the United States called for an impeachment inquiry into the actions of President Donald Trump, increasing the prospects of prolonged political uncertainty in the world’s largest economy.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2 percent, Japan’s Nikkei fell 0.55 percent, while Australian shares fell 0.66 percent.
Asian shares tracked losses on Wall Street, as US markets recorded the most volatile trading day of September on Tuesday.
The US dollar nursed losses against most major currencies as the impeachment inquiry sets the stage for a fierce battle between Democrats and Trump’s Republican Party over whether the president sought foreign influence to smear a political rival.
Sterling remained broadly higher in Asia after the United Kingdom‘s Supreme Court ruled that Prime Minister Boris Johnson‘s decision to shut down parliament was unlawful, a move that could thwart his plan to pull the UK out of the European Union next month with or without a deal.
Oil futures declined, reflecting concerns that political uncertainty and US-China trade friction will weigh in on global economic growth.
“There are a lot of factors out there that could potentially hurt market sentiment,” said Tsutomu Soma, general manager of fixed income business solutions at SBI Securities in Tokyo.
“However, some hedge funds have to close their books at the end of the month, so it may be difficult for the market to move.”
US stock futures rose 0.19 percent early on Wednesday in Asia, but the mild gains are unlikely to improve sentiment for Asian shares.
The push for an impeachment inquiry and disappointing US economic data weighed on Wall Street on Tuesday, pushing the S&P 500 0.84 percent lower, its biggest daily decline in a month.
The US House of Representatives will launch a formal impeachment inquiry into whether Trump sought help from Ukraine to smear former Vice President Joe Biden, a frontrunner for the 2020 Democratic presidential nomination. Trump has denied the claims.
It is uncertain whether the results of the inquiry will lead to an impeachment because of Trump’s support in the Republican-controlled Senate.
The dollar index measuring the greenback against a basket of six major currencies was little changed after falling 0.3 percent on Tuesday.
Sterling traded at $1.2485, down 0.1 percent, having trimmed some of its overnight gains made following the UK court ruling.
In response to the UK Supreme Court’s decision, Johnson said he disagreed and promised that the UK would leave the EU by October 31 deadline, come what may.
Calls for Johnson’s resignation could grow, which would cast even more uncertainty over how the UK would complete its divorce from the EU.
US crude futures dipped 0.73 percent to $56.87 a barrel as Trump sharpened his criticism of China’s trade policies in a speech at the United Nations, dealing a blow to hopes for a resolution to the US-China trade war.
China is a major consumer of commodities, but the trade war has caused its economic activity to slow.
The yield on benchmark 10-year Treasury notes rose to 1.6456 percent. The two-year yield also rose to 1.6156 percent as Treasury prices gave some of their gains posted in US trading.