Global equity markets slid on Wednesday as U.S. President Donald Trump warned Russia that missiles “will be coming” in Syria after a suspected chemical attack, and oil hit its highest since 2014 after Saudi Arabia said it intercepted an air strike over Riyadh.
The fallout from new U.S. sanctions on Moscow have rattled investors and fears of military action were stoked after one of Russia’s ambassadors reiterated it would shoot down any U.S. missiles fired at Syria.
Mr. Trump, who has criticized Russia for standing by Syrian President Bashar al-Assad, shot back in a message on Twitter on Wednesday.
“Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and ‘smart!’,” he wrote in the post. “You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!”
In response, Russia’s Foreign Ministry said in a Facebook post that “smart missiles should fly towards terrorists, not towards the lawful government”.
U.S. stocks added to losses on Wednesday after the release of minutes from the Federal Open Market Committee showed some concern that rising inflation might require a faster pace of interest rate hikes than anticipated.
Members of the Federal Reserve voted unanimously to raise borrowing costs by a quarter percentage point and expressed confidence that the economy would strengthen and inflation would rise in coming months.
After the FOMC minutes were released, all three major Wall Street indexes moved lower, indicating investor concerns about rising interest rates.
“The minutes were modestly negative,” said John Carey, portfolio manager at Amundi Pioneer Asset Management in Boston. “People had been speculating that due to all the turbulence in the market because of geopolitical uncertainties that the Fed might consider pausing or slowing down the interest rate increases.”
The Dow Jones Industrial Average fell 218.62 points, or 0.9 per cent, to 24,189.38, the S&P 500 lost 14.68 points, or 0.55 per cent, to 2,642.19 and the Nasdaq Composite dropped 25.28 points, or 0.36 per cent, to 7,069.03.
Facebook and Netflix helped to pare some of the losses in the S&P 500 and Nasdaq.
Facebook Inc. shares were up 0.8 per cent as Chief Executive Mark Zuckerberg gave a second day of testimony before the U.S. Congress. Netflix shares climbed 1.9 per cent following a Goldman Sachs target price increase US$60 above Wall Street’s median price target of US$300.
Canada’s main stock index was little changed on Wednesday as higher commodity prices, due to geopolitical concerns, boosted the shares of energy and materials companies, offsetting a decline in the heavily weighted financials sector.
The Toronto Stock Exchange’s S&P/TSX composite index unofficially closed down 4.24 points, or 0.03 per cent, to 15,257.9. Six of the index’s 10 main industry groups ended lower.
Suncor Energy Inc., Canadian Natural Resources Ltd. were up 2 per cent and provided the biggest boosts to the sector, which finished 1.8 per cent higher
Shares of Barrick Gold Corp and Goldcorp Inc. rose more than 2 per cent and lifted the materials sector, which sat up 0.8 per cent.
Financial stocks fell 0.8 per cent, including a 1.4-per-cent drop from Bank of Montreal and 1-per-cent decline by Royal Bank of Canada.
Spot gold added 1.2 per cent to $1,355.21 an ounce. U.S. gold futures gained 1.00 per cent to $1,359.30 an ounce as safe-haven demand sharpened.
The pan-European FTSEurofirst 300 index lost 0.60 per cent and MSCI’s gauge of stocks across the globe shed 0.16 per cent.
Emerging market stocks rose 0.14 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.04 per cent higher, while Japan’s Nikkei lost 0.49 per cent.
“It feels like there are expectations that the U.S. is going to take some action against Syria,” said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York. “The market, I don’t believe, has priced one yet.”
Oil prices jumped on Wednesday, hitting their highest in more than three years on Wednesday..
Both U.S. crude and global benchmark Brent traded at the highest levels since 2014 as geopolitical concerns overshadowed a surprise build in U.S. crude inventories.
“A bearish inventory report was quickly negated on word of intercepted rockets over Riyadh, which just adds to the recent spike in geopolitical tensions,” said Anthony Headrick, energy market analyst and commodities futures broker at CHS Hedging LLC.
Prices began to rally as Mr. Trump threatened to fire missiles at Syria. Washington and its allies have been considering air strikes following a suspected poison gas attack last weekend.
Oil climbed further as broadcaster Al Arabiya said Saudi Arabia’s air defence forces intercepted a missile over the capital Riyadh.
Brent rose $1.02 on the day to settle at $72.06 a barrel, having touched a session high of $73.09. U.S. crude futures rose $1.31 to settle at $66.82 a barrel, a 2-per-cent gain, having traded as high as $67.45.
Some major airlines were re-routing flights after Europe’s air traffic control agency urged caution for aircraft flying in the eastern Mediterranean due to possible air strikes on Syria.
The U.S. dollar fell against the yen, hitting a two-week low over lingering worries of a trade war with China and domestic scandals swirling around Mr. Trump.
The dollar index fell 0.08 per cent, with the euro up 0.12 per cent to $1.2369.
The Japanese yen strengthened 0.33 per cent versus the greenback at 106.85 per dollar, while Sterling was last trading at $1.4183, up 0.08 per cent on the day.
The Russian ruble slumped as much as 2.5 per cent against the dollar and even more versus the euro.
In metals, aluminum prices extended their rally to a sixth straight session, hitting an 11-week peak amid persistent worry about shortages after the United States imposed sanctions on Russia’s Rusal.
Palladium, which has also benefited from expectations that sanctions on Russia could hurt supply, rose further after climbing nearly 6 percent in the past two days.
Some metals entered the red. The London Metal Exchange and the CME Group said they were taking action to restrict aluminum brands of Rusal, one of the world’s biggest producers, on their exchanges.