FxWirePro: Global stocks face massive rout as geopolitical tensions take toll

Global stocks suffered massive selloff on Tuesday night as geopolitical uncertainties around the world started taking its toll as investors rushed to park money in safe-haven assets such as the yen, gold, and the U.S. Treasuries.

• The financial market participants realized that a trade truce between China and the United States is a very small achievement, and the possibility of further worsening in trade relations at this point can’t be ruled out. The current 90-day extended timeline window for negotiations is a significantly small one.
• In addition to that, tensions are escalating between Russia and the United States, with U.S. Secretary of State Mike Pompeo issuing a warning that the United States would exit the INF treaty unless Russia returns to full compliance with it. The announcement came just days after the G20 meeting in Argentina, and after President Trump canceled his scheduled meeting with Russian President Vladimir Putin over the incident in Kerch Strait, where Russia Navy seized Ukrainian navy ships and sailors, who allegedly violated Russia’s maritime border.
• Moreover, geopolitical surroundings with regard to reporter Jamal Khashoggi’s killing at a Saudi consulate in Istanbul continue to worsen, with U.S. lawmakers preparing to take actions against the prince and the kingdom.
• Iran has warned that it might close the Persian Gulf, which is a critical oil supply choke point if the United States prevents its oil exports.
• The yellow vests protests that have crippled French capital Paris for the past couple of weeks are likely to continue further.

Stocks are broadly moving higher today after a big selloff last night, but still at much lower levels compared to last night’s peak.

• Japanese benchmark stock index Nikkei is down almost 1000 points from last night’s peak, though it is up by almost 300 points from today’s bottom. The index is currently trading at 21900 area.
• UK’s benchmark FTSE100 is down 160 points from last night’s peak and currently trading at 6940 area.
• German benchmark stock index DAX was a relatively better performer last night but was still down more than 1.1 percent and closed at 11330 area.
• U.S. markets are closed today to honor the passing away of former President George H W Bush but closed down 3 percent for the day.

As the stocks declined, bonds were in demands. The U.S. benchmark 10-year treasury yield tumbled 15 bps to 2.9 percent.