U.S. equities and stock exchange traded funds slipped Tuesday but moderately pared losses by mid-day, as investors shied away from risk assets and turned to safe-haven bets amidst mounting geopolitical concerns.
Geopolitical developments across the world added to the market concerns as the U.S. considers further military action in Syria and North Korea rattles its saber in face of speculation of a pre-emptive U.S. military strike.
Observers were concerned of escalated tensions after President Donald Trump said on Twitter that “North Korea is looking for trouble,” and that the U.S. would “solve the problem,” Bloomberg reports.
“It seems like a perfect storm of factors re-pricing the reflation trade that we’ve seen since the election,” Michael Lorizio, a senior trader at Manulife Asset Management, told Bloomberg. “As the global macro picture gets muddied a bit by some strong words from North Korea and the president’s tweets, that’s spooked markets that were already in a bit of a risk-off tone to begin with.”
The White House said President Trump was open to authorizing additional strikes on Syria if Damascus uses chemical weapons again while North Korea warned of a nuclear retaliation if provoked as a U.S. Navy group ships toward the western Pacific, reports Yashaswini Swamynathan for Reuters.
Quincy Krosby, market strategist at Prudential Financial, pointed out that investors are shifting to traditional safe-haven bets, like gold bullion, U.S. Treasuries and the Japanese yen, in light of the geopolitical risks.
“The question is, is there going to be an escalation, and that’s always what the market is worried about, particularly with a new administration,” Krosby told Reuters.
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