Daily Management Review

Trump’s warning to Russia stirs the markets


04/12/2018


On Wednesday, stock exchanges have got another reason for fears amid rising tensions between the United States and Russia. This prompted investors to look for reliable positions, and also pushed aside weakening of global protectionist rhetoric. The dollar slid down when traders began to prepare for the publication of the latest data on inflation in the United States.



Gage Skidmore
Gage Skidmore
What as a cautious trade quickly turned into a risk aversion after Donald Trump twitted that Russia "must prepare" for a US missile strike against Syria because of the alleged chemical attack. US stock futures and European stocks fell, which negated most of the growth during the previous day. Escape to better-quality assets caused a jump in the price of gold, government bonds and the Japanese yen. Shares in emerging markets fell along with their currencies. Commodities preserved good support, the price of WTI crude oil rose, and the price of aluminum rushed to the highest levels since January this year.

Reaction on the stock exchanges in Asia was mixed.  Indices in China and Hong Kong showed the highest growth after the head of the People's Bank of China presented more details about the promises to open the second largest economy in the world.

This statement was made against the background of further easing of tension in trade relations with the United States, but concerns about protectionism were pushed aside in connection with the increased stress around Syria. Trump stepped up preparations for the US response to the use of chemical weapons in Syria, which only increased tensions with Russia.

Rising prices in other areas can provide the next account for explaining the behavior of interest rates in the world's largest economy. Markets are closely monitoring inflationary pressures, which may increase, and such a move could have consequences for all assets, as synchronized growth against the background of the global "bull" rally shows signs of maturation.

source: bloomberg.com






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