Asian stocks jittery after push for Trump's impeachment raise political risk

The move increases the prospects of a prolonged uncertainty in the world's biggest economy

An investor at a brokerage in Beijing. Stocks skidded in Asia on Wednesday after Democrats in the US House of Representatives said they were considered launching an impeachment probe of President Donald Trump. AP PhotoShow less

Asian stocks fell on Wednesday after US policymakers called for an impeachment inquiry into President Donald Trump, increasing the prospects of prolonged political uncertainty in the world's largest economy.

The dramatic move by House of Representatives Democrats compounded investors' anxieties with confidence already shaken by new worries about US-China trade negotiations.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.8 per cent, Japan's Nikkei fell 0.6 per cent, while Australian shares fell 0.6 per cent.

Chinese shares slumped and oil futures extended declines after Mr Trump harshly criticised Beijing's trade practices in a speech at the United Nations, damping hopes for a resolution to the US-China trade war.

The dollar nursed losses against most major currencies as the 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.

"The impeachment probe has put a dent in Asian shares," said Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Kokusai Asset Management in Tokyo.

"Chinese shares were already exposed to downside risks. Trump's comments likely increased those risks. There are worries about US consumer sentiment. There are also concerns that China's economic slowdown hasn't stopped."

US stock futures, rose 0.06 per cent in Asia on Wednesday, 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 0.8 per cent lower, its biggest daily decline in a month.

The US House of Representatives will launch a formal impeachment inquiry over whether Mr Trump sought help from the Ukraine to smear former vice president Joe Biden, a front-runner for the 2020 Democratic presidential nomination. Mr Trump has denied the claims.

It is unlikely that the impeachment inquiry would lead to Mr Trump's removal from office. Even if the Democratic-controlled House voted to impeach Mr Trump, the Republican-majority Senate would have to take the next step of removing him from office after a trial.

However, the development injects fresh uncertainty into financial markets, which have already been heavily jostled by emerging global political risks in recent years.

"If an impeachment inquiry looks like ending his re-election chances in 2020, he may throw caution to the wind and harden his attitude to a China trade deal, increasing the chances of a global recession next year," said Jeffrey Halley, senior market analyst, Asia Pacific, OANDA.

The dollar index measuring the greenback against a basket of six major currencies was little changed after falling 0.3 per cent on Tuesday.

Chinese shares fell 0.7 per cent while shares in Hong Kong skidded by 1.2 per cent.

Mr Trump on Tuesday said that Beijing had failed to keep promises it made when China joined the World Trade Organisation in 2001 and was engaging in predatory practices that had cost millions of jobs in the US and other countries.

US crude dipped 0.7 per cent to $56.86 a barrel. Brent crude fell 0.8 per cent to $62.55 per barrel.

The US-China trade war, which has dragged on for more than a year, has added pressure on China's already slowing economy and has increased the risk of recession in other countries. Slower global growth would hurt demand for energy and other commodities.

Sterling traded at $1.2473, down 0.2 per cent, having trimmed some of its overnight gains made following the UK court ruling.

In response to the UK Supreme Court's decision, Prime Minister Boris Johnson said he disagreed and vowed that Britain would leave the EU by October 31 deadline, come what may.

Calls for Mr Johnson's resignation could grow, which would cast even more uncertainty over how the UK would complete its divorce from the EU.