June 26, 2019: Rising tensions between the United States and Iran dampened the mood in equity markets on Tuesday as investors turned to safe havens such as the yen, bonds and gold, with the latter striking a near six-year high.
The losses were especially sharp on Wall Street, where sentiment was also dampened by lackluster economic data and comments from Federal Reserve Chair Jerome Powell that were less dovish than expected.
“Geopolitical tensions weighed on the (stock) markets on Tuesday after the US imposed new sanctions on Iran,” said Russ Mould, investment director at AJ Bell. “Investors (are) switching their attention once again to gold as a safe-haven asset.”
The S&P 500 dropped one percent after US consumer confidence fell to a 21-month low and after Powell described the central bank as “grappling” with the question of whether to cut interest rates — something futures market have viewed as a forgone conclusion.
The Fed chief “didn't strike the overly dovish stance (the market) wanted,” Briefing.com said.
Gold, meanwhile, got as high as $1,442.90 an ounce, its highest level since September 2013, with a softer dollar lending additional support, according to traders.
Japan's currency, viewed also as a haven investment, jumped to a near six-month high at 107.41 yen to the dollar.
Meanwhile the return on 10-year German government bonds — the European benchmark — hit a record low of -0.34 percent as investors were happy to pay more and more for the safety that comes with high-quality bonds.
Bitcoin held above $11,000 after breaking the marker on Monday for the first time in 16 months.
Meanwhile, Iran's foreign ministry said Washington's latest round of sanctions against supreme leader Ayatollah Ali Khamenei and military top brass meant the “permanent closure of the path to diplomacy” with Washington.
Trump unveiled the new restrictions on Monday, days after Iran shot down a US drone that Tehran said had entered its airspace.
– Growth in danger –
Investors are looking ahead to a planned meeting at the Group of 20 later this week between US President Donald Trump and Chinese leader Xi Jinping, hoping for signs of progress in resolving the two countries' trade war.
Chinese state media said top-level US and Chinese negotiators had held more discussions and “exchanged opinions on economic and trade issues.”
The call took place “at the request of the US side” and they agreed to maintain contact, the news agency Xinhua said.
“The prolonged trade war between the two largest economies has downgraded global growth as more barriers to trade means higher prices,” said OANDA senior market analyst Alfonso Esparza.
“Optimism remains high, but more details need to emerge before the market can fully price in how far apart the two sides really are.”
– Key figures around 2050 GMT –
New York – Dow: DOWN 0.7 percent at 26,548.22 (close)
New York – S&P 500: DOWN 1.0 percent at 2,917.38 (close)
New York – Nasdaq: DOWN 1.5 percent at 7,884.72 (close)
London – FTSE 100: UP 0.1 percent at 7,422.43 (close)
Frankfurt – DAX 30: DOWN 0.4 percent at 12,228.44 (close)
Paris – CAC 40: DOWN 0.1 percent at 5,514.57 (close)
EURO STOXX 50: DOWN 0.3 percent at 3,444.36 (close)
Tokyo – Nikkei 225: DOWN 0.4 percent at 21,193.81 (close)
Hong Kong – Hang Seng: DOWN 1.2 percent at 28,185.98 (close)
Shanghai – Composite: DOWN 0.9 percent at 2,982.07 (close)
Gold: UP at $1,422.75 per ounce from $1,407.41
Dollar/yen: DOWN at 107.18 yen from 107.30 at 2100 GMT
Euro/dollar: DOWN at $1.1370 from $1.1399
Pound/dollar: DOWN at $1.2692 from $1.2743
Brent North Sea crude: UP 19 cents at $65.05 per barrel
West Texas Intermediate: DOWN 7 cents at $57.83 per barrel
Bitcoin – UP at $11,402 from $10,925.