Trump tax cut doubts hit stocks, lifts yen vs. dollar

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Growing doubts U.S. President Donald Trump will be able to deliver on a promise of tax cuts that has powered stocks markets to record highs pushed shares lower on Wednesday and drove investors to seek safety in government debt, gold and the yen. 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. European shares opened lower after Asian shares suffered their biggest percentage daily fall since mid-December and, on Tuesday, the S&P 500 . SPX fell by more than 1 percent for the first time since Oct. 11. Waning risk appetite also hit commodities: Brent crude oil LCOc1 fell 20 cents to $50.76 a barrel, while copper CMCU3 fell 0.5 percent to $5.747 a ton. 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 time soon. Trump is trying to rally Republican lawmakers behind a plan to dismantle Obamacare, and investors worry that 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 fell 0.9 percent to a two-week low, led lower by banks . SX7P and miners . SXPP. Britain's FTSE 100 index . FTSE fell 0.9 percentMSCI's broadest index of Asia-Pacific shares outside Japan . MIAPJ0000PUS fell 1.4 percent at one point, its biggest intraday percentage fall since Dec. 15. In the previous session, the index hit its highest level since June 2015. Japanese stocks . N225 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 . MSCIEF slid nearly 1 percent.

E-mini futures on the S&P500 ESc1 and Dow Jones Industrial Average 1YMc1 indicated Wall Street would open lower and the CBOE VIX index . VIX, known as the "fear gauge", of implied volatility on the S&P topped 13 percent for the first time since mid-January. The dollar was flat against a basket of currencies . DXY but down 0.3 percent versus the yen JPY=, having hit a four-month low of 111.25 yen earlier in the day. The euro EURO= dipped 0.2 percent to $1.0790, off a high of $1.0818 as European trading began. Sterling GBP=D3 fell 0.1 percent to $1.2463. TREASURY YIELDS

U.S. Treasury yields, which fell on Tuesday with Wall Street, dropped further. The 10-year benchmark yield US10YT=RJR dipped below 2.4 percent for the first time since March 1. 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 DE10YT=RR, the benchmark for euro zone borrowing costs, then fell further and were last down 4.8 basis points at 0.41 percent."Market participants are worried about the effects and feasibility of Donald Trump's growth program," 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 assumed."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 this site/url=this site