Asian shares on defensive as new political worries sour mood

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 2.8 percent to one-month low, which would be its biggest fall in more than a year and a half, a day after it had fallen 1.6 percent. Japan's Nikkei dropped 4.6 percent. Australian shares dropped 3.0 percent to their lowest level since October while South Korean shares dropped 2.0 percent. All three broke below their 100-day moving average, a major support.

TOKYO: Asian stocks were on the defensive on Friday as worries over the U.S. investigation into the Trump Organization tested investor nerves, already frayed by fears U.S. tariffs could hurt the global economy and trigger a trade war.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.2 percent in early trade. Japan's Nikkei was down 0.3 percent.

On Wall Street, the S&P 500 edged 0.08 percent lower on Thursday, marking its first four-day losing streak of 2018.

It hit a session low soon after the New York Times reported that U.S. Special Counsel Robert Mueller had issued a subpoena for documents related to U.S. President Donald Trump's businesses.

That added to growing U.S. political uncertainties following the recent departure of two key officials, former Secretary of State Rex Tillerson and top economic advisor Gary Cohn, from the Trump administration.

The report earlier this week that Trump is seeking to impose tariffs on up to $60 billion (£43.1 billion) of Chinese imports cemented investor concerns that the administration is increasingly leaning towards protectionism.

"It seems as if for Trump, only 'America First' policies are left to boost his popularity and to get re-elected," said Hiroko Iwaki, senior strategist at Mizuho Securities.

"It is hard to expect political uncertainties to disappear soon. That will underpin bonds," she added.

U.S. Treasuries yield stood little changed at 2.826 percent in Asia after having hit near two-week low of 2.797 percent.

In Europe, German Bund yield hit a six-week low of 0.566 percent.

Political uncertainties are not unique just to the United States. In Japan, Prime Minister Shinzo Abe is under pressure for suspicions of a cover-up in the government's controversial land sale.

In the currency market, rising risk aversion pushed the dollar lower against the safe haven yen to 106.22 yen down 0.1 percent in early Asian trade.

The euro was little changed at $1.2303, having slipped 0.5 percent the previous day.

Oil prices were little changed after ending choppy Thursday trade higher as the International Energy Agency said global oil demand is expected to pick up this year, but warned supply is growing at a faster pace.

Brent futures stood flat at $65.11 per barrel.- Reuters