London View

Indices Drop Worldwide as Geopolitical Tensions Heighten

European stock markets fell on Friday in response to a Malaysia Airlines jet being shot down over Ukraine and Israel launching a ground offensive in the Gaza strip. Asian stock markets tumbled overnight with the Nikkei 225 falling by 1.1% while the Hang Seng dropped 0.7%.

The S&P 500 slid 1.2% to 1,958.12 yesterday, the biggest one-day drop since April 10, while the DJIA declined 0.9%. The Chicago Board Options Exchange Volatility Index (VIX) jumped 32%, the most since April 2013. In Europe, the Stoxx Europe 600 Index fell by 0.6% to 337.6, extending its 0.9% fall in the previous session. The FTSE100 fell 0.6% while the DAX dropped by 0.5%.

On Thursday Malaysian Airlines flight MH17, flying from Amsterdam to Kuala Lumpur, was shot down by a missile as it flew over Eastern Ukraine – currently an area of intense fighting between Ukrainian forces and pro-Russian separatists.

Ukrainian government officials said all 298 people on board the Malaysian Airlines flight were killed. The events followed harsher sanctions by EU and US lawmakers to date on Russian businesses which could tip the economy there into a recession. So far, US authorities have not been able to conclude where the missile was fired from and have not directly accused anyone of shooting down the jet. Russian President Vladimir Putin said Ukraine’s government bore responsibility for the crash; however, Ukraine’s security service said it intercepted phone conversations among pro-Russian rebels discussing the missile strike. As such, the United Nations Security Council will hold an emergency meeting over the incident later today.

Russia’s Micex index fell 1.7% on Friday, extending previous session losses of 2.3% on the harsher US and EU sanctions. The Russian rouble is down 0.2% to 35.25 against the dollar, a sixth straight day of losses. As well as the heightened geopolitical situation between the West and Russia, there are growing worries about Middle East geopolitical tensions after Israel sent soldiers and tanks into Gaza in a ground offensive after a short-lived cease-fire collapsed earlier in the day.

West Texas Intermediate crude advanced to $103.61 a barrel after jumping 2% in the previous session. Brent crude meanwhile increased 0.3% to $108.23 a barrel. Given the international situation, there was a rush towards traditional safe-haven assets; the price of gold jumped $20 overnight while the Japanese yen rose 0.5% overnight to 101.2 against USD.

Looking ahead, we have more earnings out from the US today with General Electric, Honeywell and Bank of New York Mellon all slated to report quarterly figures.