Russia halted gas supplies to Poland and Bulgaria
US major stocks were down sharply on Tuesday as risk aversion reemerged after a short-lived reprieve. The Dow Jones fell 2.38%, the S&P 500 gave up 2.81%, and the Nasdaq Composite plunged nearly 4% as risk-sensitive tech stocks were leading the losses. In individual stocks, Alphabet shares finished 3.59% lower to shed more than 3% in extended trading as Google’s revenue and earnings for the first quarter came in lower than expected. Early on Wednesday, US stock index futures bounced slightly, but more decisive recovery attempts could attract fresh selling pressure during the upcoming regular session.
Asian equities fell on Wednesday, with the MSCI AC Asia Pacific index dropping to the lowest since mid-2020 as risk aversion continued to dominate markets. The prospect of aggressive Federal Reserve monetary tightening keep pressuring risky assets while Russia’s decision to cut off natural gas supplies to Poland and Bulgaria added to investor worries. Meanwhile, fresh data out of Australia showed that inflation hit a 20-year high in the first quarter. As a result, traders are now fully pricing in a 15-basis-point hike at the RBA’s upcoming meeting due on May 3.
In Europe, equities opened little changed on Wednesday despite Russia’s Gazprom said earlier in the day that gas supplies to Poland and Bulgaria were halted until the payment in rubles is made. Earlier, investor sentiment deteriorated after Russia’s Foreign Minister Sergei Lavrov said that they rejected Ukraine’s proposal to hold peace talks in Ukraine.
Meanwhile, the US dollar index saw another rally, this time to fresh two-year highs near 102.75. The greenback continues to enjoy the flight to safety and hawkish expectations ahead of the Fed meeting due next Wednesday. The US currency retains strong bullish tone during the early European hours on Wednesday, suggesting the 2020 peak of 103.00 could be challenged in the near term. Against this backdrop, EURUSD derailed the 1.0600 figure for the first time in five years to register a fresh long-term low of 1.0587 before bouncing slightly in recent trading. The European currency remains vulnerable at the current levels despite the extremely oversold conditions.