European stocks traded firmly on the back foot Wednesday as investors backed away from all-time highs on major benchmarks and dumped the U.S dollar amid reports of an ongoing political scandal in the White House that threatens to engulf President Donald Trump's nascent administration.

The region-wide Stoxx Europe 600 Index, the broadest measure of share prices, was marked 0.3% lower by 10:30 BST, the biggest decline in nearly a month, with bank and financial sector stocks leading the declines. Germany's DAX performance index fell more than 0.7% at the opening bell, but pared that slump to around 0.4% as the session progressed. Britain's FTSE 100, however, was able to claw its way into positive territory as pound weakened modestly against the dollar, making companies on the benchmark more attractive to international investors.  

Early indications from U.S. futures prices suggest significant declines for the Dow Jones Industrial Average at the opening bell, with the benchmark poised for a 100 point decline, the equivalent about 0.6%. Similar percentage declines are also priced in for the broader S&P 500 and the Nasdaq.

The market reaction followed a report from the New York Times that the President had asked his former FBI Director James Comey to drop and investigation into Michael Flynn, his former National Security Advisor, relating to alleged ties with Russia. That allegation came shortly after the revelation that Trump had shared sensitive intelligence details related to Islamic State with Russia Foreign Minister during a visit to the White House earlier this year.

The U.S. dollar slumped to levels last seen in the immediate aftermath of Trump's surprise victory in November in overnight Asia trade, falling to as low as 97.29 against a basket of its global peers before recovering to around 97.80 in European dealing. 

Softer-than-expected home sales data, coupled with a series of signals that the so-called "Trump Bump" for the world's biggest economy is starting to fade has held down gains for the dollar and trimmed bets of faster rate hikes from the U.S. Federal Reserve.

Conversely, the dollar's weakness has helped lift the euro to multi-month highs, with the single currency trading at 1.1092222 after solid economic data and the assumption of faster inflation owing to rising oil prices and improving unemployment rates around the region.

The risk aversion held back investors in Asia, where the MSCI Asia ex-Japan benchmark was marked 0.5% lower by and the Nikkei 225 in Japan ended the session 0.5% lower at 19,814.88 points as a firmer yen capped gains for export-focused stocks.

Oil investors, however, used the dollar's slump - and a surprise build in U.S. commercial inventories - to book profits from a near one-week rally that was lead by speculation of an extension of OPEC's production cuts.

WTI futures for June delivery were marked 0.35% lower at $48.49 per barrel in early trading while Brent contracts for the same month, the global benchmark, were seen 0.14% lower at $51.58 per barrel.

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