Stocks Slip as Middle East Tensions Boost Haven Assets - The Wall Street Journal

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Will Horner

Will Horner
The Wall Street Journal
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Updated June 14, 2019 4:34 a.m. ET

Global stocks dipped Friday as rising tensions in the Middle East added to concerns over growth and trade, driving investors to haven assets.

In Europe, the Stoxx 600 fell 0.4% in early trade. That followed a downbeat session in Asia, with indexes in China, Korea and Hong Kong all lower. However, Japan’s Nikkei climbed 0.4%.

Late Thursday, the U.S. said Iran was behind an attack on two oil tankers in the Gulf of Oman that sent oil prices soaring. That added to an already tense situation in the crucial shipping channel after an attack on four other tankers in May.

On Friday, investors were buying government bonds, gold and the Japanese yen, all assets generally considered havens when market risks are growing.

The yield on 10-year U.S. Treasurys, which falls as the price rises, slipped to 2.059% Friday from 2.096% Thursday. Yields on Germany’s equivalent government bond fell deeper into negative territory to -0.260%.

Gold prices hit a 14-month high, with spot gold up 1% at $1,356.70 a troy ounce. The yen rose 0.1% against both the euro and U.S. dollar.

Thursday’s attack boosted fears of a broader military conflict in the Persian Gulf which could disrupt oil shipments.

On Friday however, oil prices stabilized, with Brent crude shedding 0.3% to $61.15 a barrel, after the price jumped 2.2% Thursday.

“Taken as a whole, these unprovoked attacks present a clear threat to international peace and security, a blatant assault on the freedom of navigation, and an unacceptable campaign of escalating tension by Iran,” U.S. Secretary of State Mike Pompeo said Thursday.

Iran denied involvement in the attacks.

The rise in oil prices helped support global stocks Thursday. The S&P 500 and Dow Jones Industrial Average both closed 0.4% higher, as rising energy company shares helped the U.S. indexes snap a two-day losing streak. Futures put both indexes on course to open 0.1% lower Friday.

An oil tanker after it was attacked in the Gulf of Oman on Thursday. Photo: handout/Reuters

Markets are “still reverberating to the tune of trade tensions between the U.S. and China and now geopolitical tensions following the attacks” in the Gulf of Oman, said Kit Juckes, global macro strategist at Société Générale .

Oil prices “have settled down a bit but it hasn’t taken tension out of financial markets,” he added.

European stocks most exposed to oil prices and global trade were registering the biggest drops Friday. The Stoxx Europe 600’s technology subindex was down 1.1% while its autos & parts subindex was 0.6% lower.

In Asia, the Shanghai Composite was down 1%, while the Shenzhen index was 1.8% lower. Hong Kong’s Hang Seng was down 0.7% amid protests in the city against an unpopular extradition bill. Data later in the day showed China’s industrial output slowed, adding to fears the country’s economic growth was faltering.

U.S. government bond yields were also falling as investors priced in expectations of an interest-rate cut by the Federal Reserve, after weak U.S. inflation figures Wednesday added to signals from the central bank that it might cut rates, Mr. Juckes said.

U.S. retail sales data due later Friday will be closely watched by investors as they look for clues on the nation’s largely consumer-driven economic growth, analysts said. The release is the last major U.S. economic report before a meeting of the Fed’s policy-making committee next week.

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https://www.wsj.com/articles/stocks-slip-as-middle-east-tensions-boost-haven-assets-11560499874

2019-06-14 08:15:00Z
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