* Europe shares hit two-week low, Asia biggest fall since
* Wall Street seen opening lower, VIX tops 13 percent
* Copper drops 0.7 percent, safe-haven gold hits three-week
* Yields drop as investors seek lowest-risk government debt
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Nigel Stephenson
LONDON, March 22 Shares fell on Wednesday,
driving investors to the safety of government debt, gold and the
yen, as doubts grew that U.S. President Donald Trump can deliver
on a promise of tax cuts that had powered stocks markets to
Wall Street was expected to open slightly lower, index
futures showed , and the CBOE's VIX index
, known as the "fear gauge", briefly topped 13 percent for
the first time since mid-January.
European shares hit two-week lows and Asian equities
suffered their biggest one-day fall since Dec. 15. After sharp
falls on Tuesday, MSCI's world stocks index fell
half a percent for its biggest two-day drop since the same date.
The dollar touched a four-month low against the Japanese
currency, whose strength helped push Tokyo stocks to a
three-week low, while the euro held close to its highest since
early February at around $1.08.
Investors' flight to safety pushed down U.S. Treasury yields
and the gap between U.S. and German 10-year government borrowing
costs hit its narrowest since November.
Waning risk appetite also hit commodities: Brent crude oil
fell more than 70 cents to as low as $50.05 a barrel,
its cheapest since Nov. 30. Copper fell 0.7 percent to
$5.736 a tonne.
The main factor behind the sell-off in risky assets was
doubt that Trump would be able to deliver on his agenda for
economic growth, including tax cuts and relaxed regulation, any
In the first major legislative battle of his presidency,
Trump is trying to rally Republican lawmakers behind a plan to
dismantle Obamacare, and investors worry failure could spell
trouble for the promised tax cuts and regulatory changes
Societe Generale currency strategist Alvin Tan, in London,
said an FBI investigation into possible ties between Trump's
campaign and Russia was also adding to investor worries.
"All in all, that’s adding to a picture that the much
hoped-for and hyped fiscal stimulus package may not be coming as
soon as markets would like it to come, if at all," he said.
The pan-European STOXX 600 index was last down 0.6
percent, having earlier dropped as much as 0.9 percent, led
lower by banks and miners. Britain's FTSE 100
index fell 0.8 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan
fell 1.4 percent at one point. In the previous
session, the index hit its highest level since June 2015.
Japanese stocks fell 2 percent, Australian shares
tumbled 1.6 percent and mainland Chinese shares closed
down 0.5 percent. MSCI's main measure of emerging market
equities slid nearly 1 percent.
The dollar, which has risen this year in anticipation of a
boost from Trump's tax reform, edged up 0.1 percent against a
basket of currencies.
However, the greenback was down 0.3 percent at 111.32 yen
, having earlier hit a four-month low of 111.12 yen.
The euro dipped 0.2 percent to $1.0790, off a high
of $1.0818 as European trading began. Sterling fell 0.2
percent to $1.2450, having earlier hit $1.2507, its strongest in
nearly four weeks.
U.S. Treasury yields, which fell on Tuesday along with Wall
Street, dropped further. The 10-year benchmark yield
dipped below 2.4 percent for the first time since March 1. It
last stood at 2.41 percent, down 2.2 basis points on the day.
In early trade, the closely watched gap between U.S. and
German 10-year yields touched its narrowest since November at
around 195 basis points. German 10-year yields, the
benchmark for euro zone borrowing costs, then fell further and
were last down 3.8 basis points at 0.42 percent.
"Market participants are worried about the effects and
feasibility of Donald Trump's growth programme," DZ Bank
strategist Birgit Figge said.
"Alongside this, speculation is persisting ... that the ECB
may possibly scale back its ultra-expansionary policy stance to
some extent at an earlier point in time than is currently being
Gold hit a three-week peak of $1,248.47 and last traded up
0.2 percent at $1,247 an ounce. It has rallied almost $50 from
last Wednesday's low after a less hawkish policy statement than
many investors had expected from the U.S. Federal Reserve.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Saikat Chatterjee in Hong Kong, Jemima
Kelly and John Geddie in London, editing by Larry King)