War drums beat world stocks down
LONDON: Stock markets retreated yesterday as US Donald Trump vowed to strike Syria over its alleged use of chemical weapons. “A touch of risk aversion crept into financial markets on Wednesday, as the sense of relief over easing US-China trade tensions was overshadowed by the rising geopolitical risk surrounding Syria,” said analyst Lukman Otunuga at FXTM online trading firm.
Trump said yesterday that “missiles will be coming” in response to an alleged chemical attack in Syria, defying Russian warnings against a strike. Upping the stakes in an escalating confrontation with Moscow, Trump took to Twitter in the strongest assertion yet that he plans to take military action in Syria.
“Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and ‘smart!’ You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!” Trump wrote. The main US stock indices opened lower, with the Dow dropping 0.8 percent in the first minute of trading.
European markets were also lower in afternoon trading, with both Frankfurt and Paris down more than half a percentage point. London fared better, with the FTSE 100 down just 0.1 percent.
Oil prices benefited, however. “Escalating tensions in the Middle East have stimulated concerns over potential supply disruptions; this is likely the main culprit behind oil’s recent aggressive appreciation,” said Otunuga.
Oil prices have approached three-year highs, with easing concerns about a US-China trade war also helping sentiment. Asian equities flitted between gains and losses, with hopes that a China-US trade war will be averted providing some support.
In a thinly-veiled warning to Trump-who has locked horns with China on trade-International Monetary Fund boss Christine Lagarde said yesterday that countries should open trade further by reforming their own domestic practices rather than putting up new barriers.
‘Steer clear’ Governments “need to steer clear of protectionism in all its forms,” Lagarde urged, adding that the “system of rules and shared responsibility is now in danger of being torn apart”. Chinese President Xi Jinping had soothed world markets on Tuesday with a conciliatory speech pledging to further open up the world’s number two economy, ease auto tariffs and take action on US intellectual property rights.
The measures address some of the key issues that have irked Trump and came after the White House on Friday unveiled another round of levies on billions of dollars of Chinese goods. Xi’s comments tempered worries about a potentially devastating trade war that could hammer the global economy just as it gets back on track after the financial crisis. The Xi speech followed a series of tit-fortat threats by the US and China to impose retaliatory tariffs on one another that have rattled markets in recent weeks. The market had surged Tuesday on easing trade worries as well as geopolitical concerns as Western governments consider their response to an alleged chemical attack in Syria, while the US is also toying with slapping Iran with sanctions.