Global stocks retreat on rising geopolitical tensions

Asian stocks were on edge yesterday as geopolitical tensions flared after Turkey downed a Russian fighter jet, while crude oil prices extended gains.

European shares also suffered, dropping to one-week lows on Tuesday as jittery investors unloaded risky assets like equities.

Travel stocks were among the hardest hit following a US travel warning, while sentiment was also depressed by disappointing updates from companies such as Zodiac Aerospace .

The pan-European FTSEurofirst 300 index closed down 1.3 percent after falling by as much as two percent. Last week the index touched a three- month high on ECB monetary stimulus hopes.

“With equity markets markedly off the September lows and expectations of more stimulus from the ECB and of a dovish hike at the Fed baked into current valuations, the downing of the Russian warplane, combined with the high terrorism alert, could be a trigger for profit taking,” JCI Capital analyst Emanuele Rigamonti said.

Turkey shot down a Russian warplane near the Syrian border on Tuesday, saying the plane had repeatedly violated its air space. But Russian President Vladimir Putin denied the claim and warned of “serious consequences” for what he termed a “stab in the back.”

It was one of the most serious publicly acknowledged clashes between a NATO member country and Russia for half a century.

MSCI’s index of Asia-Pacific stocks outside of Japan edged up 0.1 percent but shares in Hong Kong, Australia and South Korea slipped.

Japan’s Nikkei shed 0.4 percent.

“The individual impact on the market from events like the Paris attacks and heightened security in Brussels may be small, but there is also uncertainty that’s worrying investors,” said Masaru Hamasaki, head of market and investment information department at Amundi Japan.

“The stock market does not like uncertainty,” Hamasaki said.

Still, some of the markets in the region managed to hold their own even as the tense backdrop kept buyers at bay. Shanghai shares edged up 0.3 percent while Malaysian and Indonesian stocks also posted modest gains.

“The conclusion would be Russia would not want to take this too much further at a time when its economy is seeing some green shoots after the past two years of sanctions,” said Evan Lucas, market strategist at IG in Melbourne, adding that Turkey is Russia’s secondbiggest energy customer.

The incident briefly sparked oil supply fears and sent crude prices surging overnight to two-week highs.

US crude absorbed early profit taking on Wednesday and edged up 0.1 percent to $42.92 a barrel.

The rally in crude favored commodity currencies such as the Australian dollar ,which hovered near a one- month high of $0.7276.

The Canadian dollar fetched C$1.3294 to the greenback after pulling away from a twomonth low of $1.3436 struck earlier this week.

The US dollar was lower, hurt in part as the latest flareup in geopolitical tensions stoked demand for safe-haven Treasuries and drove their yields lower.

The benchmark 10-year US note yield stood at 2.239 percent after touching a three-week low of 2.206 percent overnight.

“I was a bit worried yesterday. So far Russia seems to be taking a ‘grown-up’ attitude, which was good but the market may remain a bit anxious,” said Takako Masai, head of market research at Shinsei Bank in Tokyo.