Safe haven assets slide on Syria mission hopes
Saturdays strikes marked the biggest intervention by Western countries against Syrian President al-Assad
LONDON Investors shed safehaven assets such as gold and government bonds while oil prices plummeted yesterday on expectations that the weekends missile attacks on Syria would not mark the start of greater Western involvement in the conflict there.
European shares were broadly flat, however, adding to a mixed picture in Asian stock markets and suggesting that a degree of caution still prevails.
There is some relief that a direct confrontation between the US and Russia over Syria has been avoided, said DZ Bank rate strategist Daniel Lenz, after Russian President Vladimir Putin warned on Sunday that further Western attacks in Syria would bring chaos to world affairs.
Saturdays strikes marked the biggest intervention by Western countries against Syrian President Bashar al-Assad and his ally Russia, which is facing further economic sanctions over its role in the conflict there.
The United States, Britain and France said the missile strikes targeted Syrias chemical weapons capabilities and were not aimed at toppling Assad or intervening in the civil war. US President Donald Trump tweeted Mission accomplished after the attack, underlining expectations that Western action would be limited.
Gold prices fell a quarter of a per cent to US$1,341.51 an ounce while European and US government bond yields, which move inversely to prices, rose across the board.
Yield on both German and US 10-year government bonds, seen as among the most liquid and safe assets in the world, were both at their highest level in three weeks.
Oil prices meanwhile dropped sharply, with Brent crude shedding over 1.5 per cent to $71.45 a barrel, though a rise in US drilling for new production also dragged on prices.
MSCIs world equity index, which tracks shares in 47 countries, was flat on the day and a pan-European stock index was marginally lower.
US stock futures were pointing towards a higher opening on the famous Wall Street.
That market is now focused on US first quarter earnings, especially after Februarys sell-off and tech sector woes took valuations down to more reasonable levels, said Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers.
If there is a genuine dent in earnings, people will sit up and take notice, stock and sector-specific issues are becoming important, he said.
He added that regulation will also be a powerful driver for the tech sector, citing the example of Facebook, and for the banking sector.
The dollar failed to hold its early gains on the yen and eased to 107.20, though that was still up on last weeks low around 106.62.
Dealers were keeping a wary eye on Japanese politics after a survey showed support for Prime Minister Shinzo Abe had fallen to 26.7 per cent, the lowest since he took office in late 2012.
Abes sliding ratings are raising doubts about whether he can win a third three-year term as ruling Liberal Democratic Party (LDP) leader in a September vote, or if he might even resign before the party election.
Japans Nikkei rose 0.3 per cent while MSCIs broadest index of Asia-Pacific shares outside Japan slipped 0.4 per cent as Chinese blue chips skidded 1.7 per cent.
The euro was a touch higher at $1.2357, while the dollar index eased to 89.621.
Most Southeast Asian shares fell yesterday tracking broader Asia, but losses were capped as an escalation of US-led strikes over the weekend in Syria seemed unlikely.
MSCIs broadest index of Asia-Pacific shares outside Japan fell 0.6 per cent after financials dragged Wall Street lower on Friday as results from big banks failed to enthuse investors.
Stocks in China and Hong Kong skidded more than 1 per cent yesterday on worries that slowing credit growth and tightening regulatory requirements will start to weigh on the Chinese economy later in the year.
The CSI300 index fell 1.6 per cent to 3,808.16 points by the end of the morning session, while the Shanghai Composite Index lost 1.5 per cent to 3,111.65, extending losses from Friday and sharply underperforming the rest of Asia.
The Hang Seng index dropped 1.5 per cent to 30,355.93, while the Hong Kong China Enterprises Index lost 1.9 per cent to 12,031.73.
Real estate and financial firms led the declines in both mainland and Hong Kong markets as Chinese authorities continue to tighten the screws on riskier types of financing in a bid to reduce systemic risks. REUTERS
An investor rests near a display board for stock prices at a brokerage in Beijing, China. Photo expressnews.com