Market Update: US gearing up for military response – 28.08.2013

Source: Henderson Global Investors

It was a day of heavy losses for US stock markets (S&P 500 -1.4%; Nasdaq 2.0%) as fears about a potential US-led strike on Syria weighed on risk appetite yesterday. It is reported that 355 people died during a suspected chemical attack that took place last Wednesday near the Syrian capital. The US is standing by to launch an offensive if President Obama gives the order; a number of key allies including Britain, France and Canada and the Arab League have voiced support for a firm response. Russia and China, however, have stepped up their warnings against military intervention, adding to geopolitical uncertainties. The CBOE Volatility Index, the stock market’s so-called ‘fear gauge’ has spiked more than 20% in recent days. Material-related stocks underperformed as investors retreated out of growth areas into ‘safe haven’ areas such as gold.

Overnight, emerging markets have suffered some of the steepest falls, with India, Indonesia and the Philippines’ main bourses off 1.1%, 1.6% and 3.2%, respectively. It is the third day of declines for European stocks today (FTSE Eurofirst 300 -0.2%; FTSE 100 -0.3%), with investors ditching travel & leisure stocks in favour of energy names. Brent crude oil is trading at US$115 per barrel.