London, Nov. 16 – Global stock markets pared losses and the dollar fell on Wednesday after US President Joe Biden told the G7 and NATO allies that a missile explosion in Poland was caused by a Ukrainian defense missile.
Initial relief among investors was enough to spur some bounce in stocks and commodities, but risk assets struggled to gain momentum as concerns remained that the Ukraine conflict could spill over into neighboring countries.
MSCI All-World Index (.MIWD00000PUS) It was almost unchanged on the day, falling as much as 0.2% overnight on news of the blast that killed two people.
“The key belief is that it’s not going to escalate further. Whatever it is, but it’s not an attack on Poland, Biden’s comments took the tension out of that,” said Society General Strategist Kit Jucks.
When the missile struck, NATO member Poland initially claimed a Russian-made rocket was responsible and summoned Russia’s ambassador to Warsaw for an explanation after Moscow refused to take responsibility.
The dollar, which serves as a safe haven during periods of geopolitical or market turmoil, was last down 0.3% against a basket of major currencies, gaining as much as 0.7% overnight before tracking lower in European trade.
“The initial reaction was understandable because a deliberate strike on a NATO member would represent an enormous escalation,” said Deutsche Bank strategist Jim Reid.
“It soon became clear that this was unlikely to be a direct hit, and the overnight comments mentioned above were slowing down the rapid growth.”
Biden said the United States and its NATO allies were investigating the blast, but initial reports suggested it was not caused by a missile launched from Russia.
Both the S&P 500 e-minis and Nasdaq 100 futures rose 0.1%, while US stock futures rose.
The euro rose 0.6% to $1.0411 on the previous day, while sterling was around $1.1865, after UK data showed consumer inflation rose more than expected in October.
The benchmark 10-year Treasury yield was almost unchanged at 3.807% as geopolitical tensions injected some volatility into broader markets. On Tuesday, yields hit their lowest in more than a month.
Gold rose 0.2% to $1,776 an ounce on the day, buoyed by a weaker dollar, while crude oil rose 0.3% to $94.07 a barrel, having dipped to an overnight low of $92.85.
(This story has been rewritten to correct a typo in the title)
Additional reporting by Xie Yu; Additional reporting by Ankur Banerjee; Editing by Edvina Gibbs, Edmund Claman & Simon Cameron-Moore
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