By Amanda Cooper
LONDON (Reuters) – Global stocks eased from two-month highs on Wednesday while the safe-haven dollar fell, after Poland’s president said a missile that hit his country was probably a stray Ukrainian defence projectile, dispelling fears that it originated from Russia.
Initial relief was enough to encourage some flows back into equities and commodities, but given the big gains of the last couple of weeks, investors took the news as an opportunity to book some profits, not least given the vulnerability of the economic backdrop in Europe and China in particular.
“It is the worst when we hear such news, even if it’s not from Russia, this still causes uncertainty in the markets and the European market is especially fragile heading to a confirmed recession next year due to the energy crisis and geopolitical tensions,” Raed Alkhedr, chief market analyst at Equiti.com, said.
In Europe, shares slipped, with the off 0.7%, down from Tuesday’s two-month peak, depressed by the auto sector after a report that Germany’s Mercedes Benz cut its China electric vehicle prices as sales lagged.
dropped 1.1% while 100 eased 0.1%
The MSCI All-World index was virtually unchanged on the day, having fallen by as much as 0.2% overnight when news of the explosion in Poland, which killed two people, broke.
When the missile struck, NATO member Poland first said a Russian-made rocket was responsible and summoned Russia’s ambassador to Warsaw for an explanation after Moscow denied it was responsible.
The dollar, which acts a safe haven in times of geopolitical or market turmoil, rallied as much as 0.7% overnight, before tracking lower in European trading. It was down 0.4% against a basket of major currencies.
“The initial reaction was understandable given that any deliberate strike on a NATO member would mark an enormous escalatory step,” Deutsche Bank (ETR:) strategist Jim Reid said.
“It soon became apparent that this was highly unlikely to be a direct attack.”
U.S. stock futures gave back earlier gains, with down 0.1% and down 0.2%.
The euro, which hit its highest since early July this week, was up 0.7% on the day at $1.0418, while sterling was up 0.2% at $1.1895 after UK data showed consumer inflation picked up by a lot more than expected in October.
With political tensions injecting some volatility into markets, benchmark 10-year Treasury yields fell 2 basis points to 3.777%, nudging their lowest in a month.[US/]
Gold rose 0.2% on the day to $1,776 an ounce, buoyed by a weaker dollar, while futures was steady at $93.85 a barrel, having retreated from an overnight high of $94.79. [GOL/] [O/R]
