Donald Trump’s warning to Russia about Syria missile strike hits Wall Street
Wall Street sank overnight after President Donald Trump tweeted that Russia needs to “get ready” for US missiles being fired at Syria.
Markets at 7:10am (AEST):
- ASX SPI 200 futures -0.2pc, ASX 200 (Wednesday’s close) -0.5pc at 5,829
- AUD: 77.57 US cents, 54.7 British pence, 62.7 Euro cents, 82.85 Japanese yen, $NZ1.05
- US: Dow Jones -0.9pc at 24,189, S&P 500 -0.6pc at 2,642, Nasdaq -0.4pc at 7,069
- Europe: FTSE -0.1pc at 7,257, DAX -0.8pc at 12,294, Euro Stoxx 50 -0.5pc at 3,420
- Commodities: Brent crude +1.4pc at $US72/barrel, spot gold +1pc at $US1,352.94/ounce
“Our relationship with Russia is worse now than it has ever been, and that includes the Cold War,” Mr Trump said in a follow-up tweet.
Rising tension spooks markets
Donald Trump tweets that Russia needs to ‘get ready’ for missile strikes against Syria
US markets were caught off guard by the escalation in geopolitical tensions, with the Dow Jones dropping 219 points, or 0.9 per cent, to 24,189.
The S&P 500 and Nasdaq fell by 0.6 and 0.4 per cent respectively.
Almost every S&P sector finished in the red, with financials (-1.1 per cent) and telecommunications (-1.5 per cent) being the worst performers.
However, oil was the biggest winner overnight, with Brent crude oil surging 1.4 per cent to $US72 a barrel.
This drove the S&P energy sector higher by 1.1 per cent, making it the only sector to finish the day better off.
Although Syria is not a major oil producer, any sign of conflict in the region tends to trigger concern about disrupted oil flows across the wider Middle East, where the major producers are based.
Gold also made significant gains, rising by 1 per cent to $1,352.94, as investors poured their money into safe-haven assets.
It was only yesterday that global markets surged over relief that the risk of a US-China trade war seems to have subsided — with Chinese President Xi Jinping pledging to lower import tariffs and open up his country’s economy.
“There’s general nervousness about what might happen with any strikes and the potential escalation of tensions with Russia,” said Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments in Boston.
Possibility of more US rate hikes
Donald Trump says US-Russia relations are at its worst ever
Also weighing on global markets overnight were the latest minutes from the Federal Reserve, which showed US central bankers are expecting inflation to rise in the coming months.
This sparked concerns that American interest rates might lift faster than expected this year.
The Fed board voted unanimously to raise borrowing costs by 0.25 per cent at its March meeting — to a range between 1.5 and 1.75 per cent — expressing confidence in a strengthening US economy.
“All participants agreed that the outlook for the economy beyond the current quarter had strengthened in recent months,” the Fed noted in its minutes.
“In addition, all participants expected inflation on a 12-month basis to move up in coming months.”
However, figures released by Labor Department overnight showed that US consumer prices fell by 0.1 per cent in March on a “headline” basis — the first monthly drop in 10 months.
But on a yearly basis, the headline consumer price index (CPI) increased from 2.2 to 2.4 per cent.
Last month, consumer prices were weighed down by a decline in the cost of gasoline, but underlying inflation continued to firm amid rising prices for healthcare and rental accommodation.
On a “core” basis — which excludes volatile food and energy prices — the CPI rose 0.2 per cent last month, and 2.1 per cent year-on-year.
ASX to open lower
The Australian share market is likely to fall when it opens for trade today — given the weak lead from US markets — with ASX futures falling 0.2 per cent.
The Australian dollar has fallen slightly to 77.6 US cents, 54.7 British pence and 62.7 euro cents.
In economic news, the Australian Bureau of Statistics will release its February housing finance figures.