Bonds, gold and the yen jumped in Asia on Friday while stocks retreated as investors fled to safe assets after the United States launched cruise missiles against an airbase in Syria, raising the risk of confrontation with Russia and Iran.
The US dollar dropped as much as 0.6 percent, while gold and oil prices rallied hard, though the early market panic ebbed when a US official called the attack a “one-off,” with no plans for escalation.
“It was a knee-jerk reaction because markets are starting to come back a little, as it doesn’t seem like there will be further retaliation coming,” said Christoffer Moltke-Leth, head of institutional client trading at Saxo Capital Markets in Singapore.
European stocks were also poised for a negative start, with financial spreadbetters expecting Britain’s FTSE 100 and France’s CAC 40 to open down 0.2 percent, and Germany’s DAX to start the day 0.3 percent lower.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4 percent after earlier sliding as much as 0.85 percent to a 2-1/2-week low. The index is set to end the week down about 0.2 percent.
E-mini S&P 500 futures lost 0.3 percent, having earlier tumbled as much as 0.7 percent, in unusually sharp moves for Asian hours. But Japan’s Nikkei reversed course to close up 0.4 percent, narrowing losses for the week to 1.3 percent.
Oil Prices Jump by 2%
Oil futures surged more than 2 percent to a one-month high on Friday.
After tepid trading before the attack, Brent crude futures jumped to $56.08 per barrel, in what traders called a knee-jerk reaction, before easing to $55.62 per barrel at 0704 GMT, still up 1.3 percent from their last close.
US West Texas Intermediate (WTI) crude futures also climbed by more than 2 percent, to a high of $52.94 a barrel, before receding to $52.46, up 1.45 percent. Both benchmarks hit their strongest levels since early March.
“The US cruise missile strikes have seen crude oil jump over 2 percent in a straight line,” said Jeffrey Halley of futures brokerage OANDA in Singapore.
Although Syria has limited oil production, its location in the Middle East and alliances with big oil producers raised worries about spreading conflict that could disrupt crude shipments.
In oil supply fundamentals, markets remained oversupplied, even with efforts led by the Organization of Petroleum Exporting Countries (OPEC) to cut supplies to prop up prices.
Oil trading data in Thomson Reuters Eikon shows that globally shipped crude volumes stood at 1.4 billion barrels in March (around 45.6 million bpd), up from 1.1 billion barrels in February, although on a daily basis the figure was similar to February's 45.5 million bpd due to that month's fewer days.
Shipped oil flows also remain higher than at any time during the second half of 2016, before the OPEC-led cuts were implemented, implying either poor compliance with the supply reductions, or plentiful alternative supplies.
(The article has been edited for length)
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