The US stock markets close in the red after the conflict between the US and Iran has intensified. Among other things, there are fears that Tehran could block the Strait of Hormuz for oil tankers. The oil price is therefore skyrocketing, which in turn sends some stocks down.
After a brilliant start to the year, US stock markets fell after a high-ranking Iranian general was killed in a US military strike near the Iraqi capital, Baghdad. The United States are also stepping up their presence in the region, However, the stock markets recovered somewhat from their daily lows at the beginning of trading as the process progressed.
Meanwhile, US President Donald Trump showed up from Tehran’s retaliation threats unimpressed. Trump is determined to do what is necessary. However, he does not aim to change regime in Iran.
The Dow Jones index fell 0.8 percent to 28,635 points. The S & P 500 closed 0.7 percent lighter at 3,235 points during the Nasdaq Composite also lost 0.8 percent to 9,021 points.
Geopolitical risks have not disappeared just because the stock market has recently gone well, commented Luca Paolini, chief strategist at Pictet Asset Management, on the recent escalation of the conflict between the United States and Iran. As soon as a certain complacency spread on the market, a comparatively insignificant event could bring about an abrupt change of direction. Other observers, on the other hand, cited the old stock exchange wisdom that political stock exchanges have short legs.
US industry is growing more slowly
However, published economic data showed light and shadow. While construction spending rose 0.6 percent seasonally adjusted in November compared to the previous month and exceeded economists’ expectations of an increase of 0.4 percent, US industry growth continued to slow in December. The one calculated by the Institute for Supply Management (ISM) Manufacturing purchasing managers’ index reduced to 47.2 (previous month: 48.1). Economists had forecast an increase to 49.0.
The US monetary authorities showed no rush at their council meeting on December 10th and 11th, the three rate cuts to quickly undo the past year. As noted in the minutes of the meeting, despite the recent improvements, central bankers see an increased risk that economic growth will be weaker than hoped. Reasons are to be found in the weaker global economy and the trade conflict with China.
Oil prices rise – “safe havens” sought
The news of the death of the Iranian general Kassem Soleimani left the oil prices rise, because there is fear in the market that Tehran could block the Strait of Hormuz in the Persian Gulf for oil tankers. The price of a barrel of US crude oil WTI rose 2.9 percent to $ 62.96, the European reference variety Brent rose 3.6 percent to $ 68.64.
The US oil inventory did not give the market any additional positive impetus. According to the state Energy Information Administration (EIA), they fell significantly by 11.46 million barrels compared to the previous week. Analysts had forecast a decline of 3.3 million barrels. However, US oil production stagnated at a record 12.9 million barrels a day.
Supposedly safe ports like gold or government bonds were also in demand. The price for the troy ounce gold rose 1.2 percent to $ 1,549, the highest level in four months. In the bond market, rising quotes significantly depressed the yield on ten-year US bonds by 8.7 basis points to 1.79 percent.
Refugee currencies such as that benefited from the events in Iraq yen, The dollar dropped to 108.11 yen after having peaked at 108.87 yen on Thursday. The euro recovered somewhat from its daily low against the dollar. At the close, the common currency was trading at $ 1.1162, down from 1.1125. The previous day at the same time, the euro was still trading for $ 1.1195.
Armaments shares coveted, Tesla with record sales
Defense stocks have benefited from the escalation of the US-Iran conflict. Lockheed Martin advanced 3.6 percent, Northrop Grumman by 5.4 percent and Raytheon by 1.5 percent.
Energy stocks were mixed in the slipstream of oil prices. For Exxon Mobile it went down 0.8 percent and Chevron listed 0.3 percent lighter. Chesapeak Energy however, rose by 6.6 percent.
Higher oil prices are negative for airlines. Accordingly, the sector’s shares fell above average. American Airlines cheaper by 5.0 and delta by 1.7 percent. Alaska Air Group fell by 1.8 percent.
The Tesla shares meanwhile rose to a record high and closed 3.0 percent firmer. The manufacturer of electric cars posted record sales in the fourth quarter.
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