Geopolitical Tensions Pressure Markets, Yen Recovers

Sentiments are pressured by geopolitical tensions in Syria. DOW dropped -62k to close at 1,4946.46 in late trading. Nikkei tried to recover earlier losses, but reversed and is down -101.71 pts at the time of writing. Other major Asian indices stayed in red with HK HSI down over -200 pts. In the currency markets, yen recovered broadly in Asian session today on safe haven flow, while Aussie weakened and is back below 0.9 against the dollar. Meanwhile, European majors are stuck in tight range against the greenback.

The US signaled the possibility of striking cruise missiles to "deter and degrade" the capabilities of Syrian President Assad whose regime has been accused of using chemical weapons against the civilians. According to U.S. Secretary of State Kerry Syria's use of chemical weapons is "undeniable" and is a "moral obscenity". He also stated that, "President Obama believes that there must be accountability for those who would use the world's most heinous weapons against the world's most vulnerable people". The tensions heightened further as UN inspectors were fired on as they attempted to inspect the site of the alleged chemical attacks.

In China, ahead of the G-20 meeting next week, PBOC's Deputy Governor Yi Gang stated that the focus of the summit "will be on how to minimize the external impact when major developed countries exit or gradually exit quantitative easing, especially causing volatile capital flows in emerging markets and putting pressures on emerging-market currencies". Regarding China's monetary policy, Finance Minister Zhu Guang Yao said that stimulus measures by the government are not necessary for now.

On the data front, German IFO will be the main focus in European session and is expected to show improvement in August. The U.S. will release S&P Case Shiller house price and consumer confidence.