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Global Stocks Tick Up as Geopolitical Risks Abate

By Anna Hirtenstein 

Global stocks drifted higher Monday on signs that geopolitical risks are in check with no new tensions arising in the Middle East over the weekend following the U.S. airstrike that killed an Iranian leader earlier this month.

Futures tied to the Dow Jones Industrial Average edged up 0.3%. The pan-continental Stoxx Europe 600 gauge wavered between gains and losses. In Asia, the Shanghai Composite Index closed up 0.8%.

Tensions between the U.S. and Iran have eased in recent days, with the spotlight on the Islamic Republic after it admitted last week that it accidentally shot down a Ukrainian passenger flight, killing 176 people. Wide-ranging protests within Iran over the weekend have forced Tehran to focus on domestic affairs, easing concerns that it would escalate the recent conflict with the U.S.

Meanwhile, the U.S. and China have both said that they plan to sign a phase-one trade deal on Wednesday, defusing tensions that have roiled global markets for two years.

"Things that have concerned the market such as the tensions between the U.S. and China, and Iran, the direction of travel is improving," said James Athey, a senior investment manager at Aberdeen Standard Investments. "The path of least resistance is higher: essentially equities have gotten to the stage where in the absence of anything bad, they will be performing pretty strongly."

Gold slid 0.5% in a sign of improving investor sentiment as traders exited haven assets that are often bought to hedge against market volatility. The precious metal traded at $1551.90 an ounce.

In the U.K., the British pound dropped 0.6% against the dollar, trading as low as $1.2969 on Monday after a Bank of England policy maker signaled that he would likely support an interest-rate cut later in the month. Monetary policy committee-member Gertjan Vlieghe said that he would vote for a reduction if there are no signs that the economy is improving, according to the Financial Times. The drop in the pound helped fuel a rally in the U.K.'s FTSE 250 index, which gained 0.9%.

The yield on 10-year U.K. government bonds fell to 0.735%, the lowest since Jan. 3, as fresh data showed that the U.K. economy contracted unexpectedly in November. Manufacturing output also fell 1.7% and industrial production dropped 1.2%.

"The key point that policy makers reiterate is that if the data doesn't improve from current levels, a rate cut is likely to be warranted," said Jordan Rochester, a currency strategist at Nomura.

Later in the day, the Treasury Department will provide a snapshot of the country's budget deficit in December since the start of the fiscal year on Oct. 1.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com

 

(END) Dow Jones Newswires

January 13, 2020 07:08 ET (12:08 GMT)

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