European shares and Asian assets fall on India-Pakistan tensions

London — European stock markets opened lower on Wednesday after fresh hostilities erupted between India and Pakistan, causing Asian assets to fall and pushing investors into safe havens, such as the yen.

After about an hour of trading, the pan-European STOXX 600 was down about 0.5%. All the main regional indices were in the red. US stock futures for the S&P 500 were down 0.1%.

Earlier, Pakistan said it had carried out air strikes in Indian-controlled Kashmir and shot down two Indian jets in its own airspace.

Indian and Pakistan bonds and currencies fell and MSCI’s broadest index of Asia-Pacific shares outside Japan was last down 0.15% as the threat of conflict between the nuclear-armed neighbours grew.

“This adds another layer of risks for investors,” said Charles St-Arnaud, a strategist at Lombard Odier, although he noted the market moves remained limited for now.

Markets were watching the US-North Korean summit, which begins in Hanoi later on Wednesday. US President Donald Trump will meet North Korean leader Kim Jong-un for their second summit, with the US pushing North Korea to dismantle its nuclear weapons programme.

The heightened geopolitical risks helped assets considered safer than stocks, such as the Japanese yen, which gained against the dollar.

The dollar hovered around a three-week lows after US Federal Reserve chair Jerome Powell reiterated on Tuesday that the Fed had shifted to a more “patient” policy approach regarding changes to interest rates. “We didn’t learn much new,” St-Arnaud said. The new dovish stance of US monetary policy has not weakened the dollar much, notably against the euro.

Also in the currency market, the pound continued to rise after UK Prime Minister Theresa May offered law makers a chance to vote on delaying Brexit. Sterling last traded at $1.3274, having risen to $1.3288 on Tuesday, its highest levels in five months.

Oil prices rose after a report that US crude inventories have declined and as oil cartel Opec seemed to stick to its supply cuts despite pressure from Trump. International Brent crude futures  were at $65.32 a barrel, up 0.11c, or 0.21% from their last close.

Gold was down 0.17% at $1,326.24. 

Reuters