Investors scramble for haven assets after Paris attacks
Monday 02:05 GMT: Friday’s attacks in Paris sent investors scrambling into haven assets from equities, while retaliatory strikes against Isis in Syria sparked a jump in the price of oil.
Equity markets in Asia sold off across the board, though were off initial lows.
“There is no sense of panic in Asia to weekend developments,” said Prashant Newnaha, strategist at TD Securities. “At this stage, we do not think weekend events will derail a Fed rate increase unless the hit to risk is larger and sustained.”
Haven assets were in demand nevertheless. The price of gold was up 0.8 per cent at $1,092.60 an ounce, breaking a four-day losing streak. The Japanese yen gained 0.1 per cent, and bonds in more developed markets drew buyers.
Yields on 10-year sovereign debt in Australia, South Korea and Singapore were down by 5 basis points, 1.1bps, and 7.5bps, respectively.
The price of Brent crude oil rose 2.5 per cent to $44.68 a barrel, as France launched air strikes against Isis targets in Syria on Sunday night, with jets bombing the Islamist terror group’s stronghold of Raqqa.
Last week the price of oil fell more than 8 per cent to below $44 a barrel as oil inventories swelled to their highest level on record. Brent traded at nearly $70 a barrel as recently as May.
In Japan, where data confirmed the economy had fallen into its fourth recession in five years, the Nikkei 225 was down 0.9 per cent with all sectors but energy in retreat. The average initially fell 1.8 per cent.
Japan’s economy shrank by an annualised rate of 0.8 per cent in the third quarter, versus forecasts for a 0.2 per cent decline. But details of the report including inventories, consumption and net exports were not so pessimistic.
“Real GDP contracted for two quarters in a row, experiencing another ‘technical’ recession. Yet, the year-on-year rate of growth in real GDP remained ‘substantially’ positive (+1% year-on-year) from Japanese standards, enjoying a 0.4 percentage point upward revision to second quarter growth,” wrote Hiromichi Shirakawa at Credit Suisse.
“We continue to think that results of the third-quarter GDP data are unlikely to trigger any material policy stimulus.”
Elsewhere, too, initial knee-jerk declines were being pared. Sydney’s S&P/ASX 200 was down 0.7 per cent versus an earlier fall of 1.4 per cent. South Korea’s Kospi Composite was off 1 per cent after falling 1.4 per cent earlier.
In Greater China, the Shanghai Composite slipped 0.5 per cent lower and the Shenzhen Composite edged down 0.1 per cent, well off initial losses of 1.7 per cent and 2.1 per cent lower, respectively. Hong Kong’s Hang Seng Index was off 1.4 per cent, trimming a 2 per cent fall.
The broad declines followed a weak session for US markets on Friday. The S&P 500 fell 1.1 per cent, for a weekly loss of 3.6 per cent, as a wider decline in commodities weighed on markets.