London (United Kingdom) (AFP) – Stock markets retreated on Wednesday as US President Donald Trump’s vow to strike Syria over its alleged use of chemical weapons made investors jittery.
“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.
Trump said “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.
– ‘It’s all relative’ –
Martial rhetoric put markets “back to a more defensive posture”, said Jasper Lawler, head of research at London Capital Group.
“It goes to show it’s all relative. If there’s a choice of war, most would prefer a trade war to armed conflict,” he said.
Investors’ money flowed from risky stocks into the relative safety of fixed-income markets, with bond yields falling the world over.
The oil price surged, approaching three-year highs, as investors began to worry about how freely crude will flow if tensions rise further.
“Escalating tensions in the Middle East have stimulated concerns over potential supply disruptions,” said Otunuga.
– Trade still a worry –
The threat of a China-US trade war, meanwhile, remained very much on investors’ minds.
IMF boss Christine Lagarde said Wednesday that countries should open trade further by reforming their own domestic practices rather than putting up new barriers.
Governments “need to steer clear of protectionism in all its forms,” Lagarde urged, in an apparent appeal to Trump, 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.
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.
– Key figures around 1540 GMT –
New York – Dow: DOWN 0.5 percent at 24,280.34
London – FTSE 100: DOWN 0.1 percent at 7,257.14 (close)
Frankfurt – DAX 30: DOWN 0.8 percent at 12,293.97 (close)
Paris – CAC 40: DOWN 0.6 percent at 5,277.94 (close)
EURO STOXX 50: DOWN 0.6 percent at 3,419.71
Tokyo – Nikkei 225: DOWN 0.5 percent at 21,687.103 (close)
Hong Kong – Hang Seng: UP 0.6 percent at 30,897.71 (close)
Shanghai – Composite: UP 0.6 percent at 3,208.08 (close)
Euro/dollar: UP at $1.2381 from $1.2356 at 2100 GMT on Tuesday
Dollar/yen: DOWN at 106.71 yen from 107.20
Pound/dollar: UP at $1.4207 from $1.4176
Oil – Brent North Sea: UP $1.24 at $72.28 per barrel
Oil – West Texas Intermediate: UP $1.39 at $66.90