BANGKOK (AP) — World shares fell yesterday as financial markets were rattled by escalating tensions in the Middle East following the killing by a United States (US) air strike of an Iranian general.
Germany’s DAX dropped 1.9 per cent to 12,968.93 and the CAC 40 in Paris gave up 1.3 per cent to 5,967.66. In London, the FTSE 100 lost 1.1 per cent to 7,540.92. The future contract for the S&P 500 declined 0.7 per cent, while that for the Dow Jones Industrial Average lost 0.8 per cent.
After a brief respite thanks to a preliminary agreement between Washington and Beijing that staved off a further escalation of trade tensions, world markets have been hit by a fresh onslaught of worries.
An Iranian general who replaced the leader killed by the US airstrike in Baghdad vowed on Sunday to take revenge as Tehran abandoned the remaining limits of its 2015 nuclear deal with world powers in response to the slaying.
Esmail Ghaani’s threat came as the backlash over the US killing of top Iranian general Qassem Soleimani mounted, with Iraq’s parliament calling for the expulsion of all American troops from Iraqi soil.
US President Donald Trump said the attack was ordered because Soleimani was plotting to kill many Americans. The Pentagon took steps to reinforce the American military presence in the Middle East in preparation for reprisals from Iran.
The air strike marks a major escalation in the conflict between Washington and Tehran, and investors sought safety in US government bonds, sending their yields lower. The price of gold rose.
Asian economies depend heavily on oil from the Middle East, and oil prices surged, with benchmark US crude oil up 85 cents, or 1.3 per cent, to USD63.89 per barrel. It jumped 3.1 per cent to USD63.05 per barrel last Friday. Brent crude, used to price international oils, rose USD1.11 or 1.6 per cent to USD69.71 per barrel. It rose USD2.35, or 3.5 per cent, to close at USD68.60 per barrel last Friday.
The Nikkei 225 index in Japan slid 1.9 per cent to 2204.86 yesterday, while Hong Kong’s Hang Seng index lost 0.8 per cent to 28,226.19. In South Korea, the Kospi lost one per cent to 2,155.07. The S&P ASX 200 was almost unchanged, at 6,735.70. The Shanghai Composite index also was flat, at 3,083.41. India’s Sensex slipped two per cent to 41,652.71. Shares also fell in Taiwan and Southeast Asia.
The dollar fell to JPY107.97 from JPY108.09 last Friday. The euro rose to USD1.1189 from USD1.1159.
LastFriday, the S&P 500 dropped 0.7 per cent to 3,234.85, ending with a 0.2 per cent loss for the week. The Dow Jones Industrial Average fell 0.8 per cent, to 28,634.88. The Nasdaq lost 0.8 per cent to 9,020.77 and the Russell 2000 index of smaller company stocks gave up 0.4 per cent to 1,660.87.
The major stock indexes were coming off record highs after closing out 2019 earlier in the week with the best annual performance by the S&P 500 and Nasdaq since 2013.
The price of gold, which investors buy in times of uncertainty as a safe haven of value, rose USD28.00, or 1.8 per cent, to USD1,580.30 per ounce.
Bond prices rose. The yield on the 10-year Treasury fell to 1.78 per cent from 1.79 per cent late Friday, a big move. Lower bond yields bring down the interest rates that banks charge for mortgages and other consumer loans, making them less profitable.