Syrian concerns weigh on stocks but boost oil
AP and AFPLONDON/ HONG KONG--Growing concerns over a military intervention in Syria weighed on stock markets Tuesday but gave a lift to oil prices as well as supposedly safe assets such as the Japanese yen and gold.
August 28, 2013, 12:01 am TWN
A day after U.S. Secretary of State John Kerry Monday claimed it was “undeniable” that the Syrian government used chemical weapons, stock investors have fretted about the possibility of U.S.-led military action against the regime of President Bashar al-Assad. At times of uncertainty, investors often move out of perceived risky assets such as stocks.
In Europe, the FTSE 100 index of leading British shares was down 0.6 percent at 6,451 while Germany's DAX fell 1.5 percent to 8,305. The CAC-40 in France was 1.4 percent lower at 4,009.
Wall Street was poised for a lower opening too, with Dow futures and the broader S&P 500 futures 0.6 percent lower.
Though developments over Syria will likely drive sentiment through the rest of the day, investors will be closely monitoring the next batch of U.S. economic data following dismal durable goods orders figures for July. The main point of interest will be the monthly consumer confidence report from the Conference Board. If it, too, is disappointing, then traders may rein in their expectations that the U.S. Federal Reserve will start to reduce its monetary stimulus next month.
At present, the Fed is buying US$85 billion of financial assets a month in order to lower long-term interest rates and shore up the U.S. economic recovery. Up until recently, a run of data, particularly related to the labor market, have ratcheted up expectations that the so-called tapering will begin in September.
Though the stimulus has been a boon to many financial assets such as stocks thanks to the liquidity finding its way into the markets, investors will be concerned that the U.S. economy may not be growing as fast. That's a potential negative for stocks and may offset — or even outweigh — any cheer investors get from the Fed keeping the stimulus tap on for longer than thought.
As for Asian markets, they were mostly lower Tuesday as fears of military intervention in Syria added to concerns over when the U.S. Federal Reserve would taper a massive stimulus program.
Tokyo ended down 0.69 percent and Seoul closed 0.11 percent lower. But Sydney gained 0.11 percent on profit-taking, following early losses after some poor earnings reports — including a mammoth loss of US$770 million for Billabong.
Hong Kong closed down 0.59 percent while Shanghai was up 0.34 percent.
The fears of military action come as expectations of an end to the U.S. stimulus program have seen investors in recent months repatriate some of the vast sums that have poured into emerging economies, hitting currencies and equities.
The price of gold rose to a near three-month high of US$1,410.75 at 1100 GMT Tuesday, up from US$1,394.40 late Monday.
In other markets:
— Jakarta ended down 3.71 percent, or 152.83 points, at 3,967.84.