By Joyce Yu
Philadelphia, PA–First it was trade wars, now it’s real wars. Global market was lower on Wednesday after President Donald Trump warned Russia on that it should “get ready” for a missile strike on Syria. US stocks lost nearly 1% as investors are worried about a wider military conflict in the Middle East.
“Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and ‘smart’ “, Trump tweeted. Dow futures were already looking down before the President’s tweet after a Wall Street Journal report that the Trump administration is pressing allies to back a military strike on Syria. The White House said on Tuesday that Trump canceled a planned trip to South America to remain in the United States to “oversee the American response to Syria.”
“It’s not that this wasn’t expected. Trump had already hinted at a response,” Quincy Krosby, chief market strategist at Prudential Financial, told the CNBC. “I think the market was caught offguard by the tone of the response.”
US crude oil prices jumped higher and European markets were lower on Wednesday following a mixed session in Asia. “The big concern, much like the tariff issue, is: Does this broadens into something nastier? Will Russia somehow retaliate and drag us into something more?” said Bruce McCain, chief investment strategist at Key Private Bank.
The last time the market was so volatile traces back to 2015 August when China devalued its yuan and the markets then took nearly six months to find a bottom. But analysts think it will be all different this time.
“We have expanding earnings. We were in the midst of an earnings recession back in the middle of 2015. Now we have earnings that are going to be up about 20 percent in the first quarter,” LPL Financial’s Ryan Detrick told the CNBC. “The global economy is still really strong and it’s being led by earnings. That’s one major difference between now and 2015.”
Over to the global economy, IMF Chairman Christine Lagarde said in her speech at the University of Hong Kong that the global economy continued to grow strongly and remained optimistic about the remainder of 2018 and 2019. But she also warned that the rules that underpin global trade were “in danger of being torn apart” by protectionist forces.
She stressed Tariffs “not only lead to more expensive products and more limited choices, but also prevent trade from playing its essential role in boosting productivity and spreading new technologies” , calling on countries to “steer clear of protectionism in all its forms”.
Finance ministers from around the world will gather in Washington next week to discuss challenges faced by the global economy.
