Investors play safe around the world as Syria tensions mount
Oil eases from 5-week high; gold jumps
NEW YORK, April 11, (RTRS): Nervous investors sought shelter in gold, Treasuries and the yen on Tuesday as tensions between the United States and Russia over Syria took center stage after comments by US Secretary of State Rex Tillerson.
US indexes were lower while European shares reversed slight gains amid uncertainty over the looming French presidential election.
US Treasury yields fell on Tuesday for a second straight day as anxiety about possible US military strikes against Syria and North Korea and the outcome of the coming French election spurred demand for low-risk government debt.
The Dow Jones Industrial Average fell 94.39 points, or 0.46 percent, to 20,563.63, the S&P 500 lost 15.61 points, or 0.66 percent, to 2,341.55 and the Nasdaq Composite dropped 52.14 points, or 0.89 percent, to 5,828.78.
Emerging market stocks were down 0.4 percent, on track for their fourth straight day of declines.
The dollar index, which measures the greenback against a basket of currencies, was down 0.3 percent. The US dollar was down 0.7 percent and the euro fell 0.5 percent against the broadly stronger Japanese yen. The euro hit an almost five-month low versus the yen.
Along with concerns about Syria investors were also looking anxiously to France where the latest polls showed far-left candidate Jean-Luc Melenchon gaining against the rest of the pack before the first round of voting on April 23.
The pan-European STOXX 600 share index fell 0.4 percent. MSCI’s main index of Asia-Pacific shares, excluding Japan fell 0.3 percent.
Gold, viewed in times of global tension as a safe place to store wealth, last traded up 1 percent on the day at almost $1,266.96 an ounce. It hit a five-month high above $1,270 on Friday after the US missile strike.
Oil retreated from five-week highs hit earlier in the day as concerns about rising US shale production offset support from tensions in the Middle East and production cuts in OPEC and other states.
Global benchmark Brent fell 0.5 percent to $55.69, breaking a six-session winning streak. US crude was down 0.4 percent at $52.90 per barrel.
US
US stocks came off session lows on Tuesday, but the S&P 500 was still on track for its worst day in three weeks amid mounting geopolitical tensions.
The White House said on Monday President Donald Trump was open to authorizing additional strikes on Syria if its government uses chemical weapons again or deploys barrel bombs.
Adding to the dour mood, North Korea state media warned of a nuclear attack on the United States if provoked as a US Navy strike group moved toward the western Pacific.
Prices of spot gold jumped to their highest since November. Demand for US Treasuries and the Japanese yen also rose.
The dollar index softened, while oil prices eased from five-week highs.
At 12:27 p.m. ET (1627 GMT), the Dow Jones Industrial Average was down 47.11 points, or 0.23 percent, at 20,610.91, the S&P 500 was down 9.88 points, or 0.42 percent, at 2,347.28 and the Nasdaq Composite was down 28.49 points, or 0.48 percent, at 5,852.44.
However, Trump’s comments during a meeting with chief executives of US companies helped the market recoup some losses.
Trump said his administration was working to reduce regulations and revamp the Dodd-Frank law, which may be eliminated and replaced with “something else.”
The tailwinds for the market are fundamentals and the hope of progrowth policy, while the negatives are the unpredictability of geopolitical risks, said Art Hogan, chief market strategist at Wunderlich Equity Capital Markets in New York.
Ten of the eleven major S&P 500 sectors were lower.
The financial sector was the biggest loser, with a 0.83 percent decline. Banks, which are scheduled to start reporting quarterly earnings this week, were the top drags.
Technology sector’s 0.7 percent decline was largely due to a 1 percent fall in Apple. The iPhone maker was also the biggest drag on the three main indexes.
Real estate - considered a defensive play of the broader index - was the outlier. Utilities and consumer staples, the other defensive sectors, fell the least.
The CBOE Volatility index, also called Wall Street’s “fear gauge”, shot up to its highest level in five months.
Europe
A sharp drop in shares of Applesupplier Dialog Semiconductor dominated trading in otherwise muted European stock markets on Tuesday as a shortened week and risk-off sentiment kept investors from making big bets.
The pan-European STOXX 600 ended flat as gains in the luxury goods sectors offset weakness in chipmakers and financials. Betterthan-expected quarterly sales at LVMH lifted shares of the world’s largest luxury goods maker to a record high.
European shares have been treading water in recent sessions, with the benchmark index little changed so far this month on mounting political tensions in the Middle East and North Korea, above-average valuations and caution ahead of earnings season.
Expectations that European stocks might see bigger swings in the short term rose to their highest since end-February, following a similar spike in volatility on Wall Street overnight.
On the day, tech stocks were the worst sectoral performers, with a subindex tracking top European tech firms down 1.2 percent. Losses were led by Dialog Semiconductor, which lost 14 percent after a German broker said the company risks losing business from Apple.
Dialog sharespared some losses as big banks including Barclays, Morgan Stanley and BofA-ML cast doubts on views that the firm risked losing business from Apple and called the share slide an over-reaction. Dialog had lost one-third of its market value at one point.
Last week, shares in Imagination Technologies lost two-thirds of their value after Apple, its biggest customer, said that it would stop using Imagination’s graphics technology.
Industry peer AMS also came under pressure after UBS cut its rating to “neutral” from “buy”, sending the stock down 9.5 percent, while STMicroelectronics fell 3.6 percent.
Elsewhere, share price moves were driven by dealmaking expectations.
French rail equipment maker Alstom fell 2.7 percent on reports that rivals Siemens and Bombardier were in talks to combine their rail operations.
Italian restaurants firm Autogrill surged 8.2 percent to a record high after news that it plans to separate its food and beverage business fueled speculation of possible merger and acquisition activity.
Banking stocks dropped 0.7 percent, with Banco Popular the biggest loser, down 9.7 percent and hitting fresh record lows. On Monday, the bank said that it was considering another capital hike to clean up its balance sheet and would consider a merger deal.
Asia
China stocks reversed earlier losses to end higher on Tuesday, led by the Shanghai benchmark index closing at a 15-month high.
Strong gains in stocks related to the Xiong’an New Area underpinned the market, even as investors continued to retreat from smaller-caps over regulatory concerns.
The blue-chip CSI300 index rose 0.3 percent to 3,517.33 points, while the Shanghai Composite Index added 0.6 percent to 3,288.97 points.
Stocks and sectors expected to benefit from the country’s newlylaunched Xiong’an New Area continued to grab attention, with shares in around 30 listed companies rocketing 61 percent in just five sessions.
Beijing on Saturday announced plans to build Xiongan New Area, modelled on the Shenzhen special economic zone next to Hong Kong that helped kickstart China’s economic reforms in 1980.
“The Xiong’an New area could prove to be a big investment theme within the year,” said Zhang Gang, an analyst with China Central Securities.
Oil
Crude oil edged back from a fiveweek high on Tuesday, as rising US shale oil production weighed against support from tensions in the Middle East and production cuts in OPEC and other states.
Brent crude, the international benchmark for oil, was down 45 cents from its previous close at $55.53 per barrel at 1425 GMT. Earlier in the session, Brent had climbed to its highest since March 7 at $56.16.
US West Texas Intermediate (WTI) fell by 29 cents to $52.79 a barrel, after touching a five-week high of $53.23.
Brent has risen in each of the previous six sessions, while WTI gained for the last five days.
But analysts said there are worries that demand growth could falter, adding that other indicators were warning that the market had not yet cleared enough of its surplus to keep prices rising.
US crude inventories have touched record highs at the US storage hub of Cushing, Oklahoma and in the US Gulf Coast in recent weeks, according to US government data.
A Reuters p w woll of analysts forecast a rise in US crude inventories for a fourth straight week.
Gold
Gold jumped more than 1 percent on Tuesday as investors sought assets seen as havens from risk amid mounting political and security concerns over North Korea, the Middle East and the looming French election.
Spot gold was up 0.9 percent to $1,265.47 per ounce at 1412 GMT, within striking distance of its highest level since November of $1,270.46 touched on Friday.
US gold futures rose 0.4 percent to $1,259.20.
Global tensions escalated on Tuesday when Western countries were joined by Middle Eastern allies in a push to isolate Syrian President Bashar al-Assad following a chemical attack in the country last week.
This combined with uncertainty about the result of the upcoming French presidential election to boost demand for safe-haven assets among jittery investors.