World markets went to risk off overnight, sending prices lower in Europe and the US after the shooting down of a Malaysian Airlines jet over eastern Ukraine and the launching of a ground invasion of Gaza by the Israeli military.
Gold, oil and wheat prices rose, as did the prices of US and European bonds (meaning their yields fell sharply).
As a result of the falls, our market will open 25 points or thereabouts lower this morning.
The Aussie dollar rose to just under 93.50 US cents in early Asian trading this morning.
Markets were initially hit by the news of the Malaysian jet’s destruction and then were further rattled by news of the ground offensive in Gaza.
Ukrainian officials said the aircraft may have been shot down, possibly by a Russian-made antiaircraft system.
That has been denied and the Russians are blaming the Ukrainians.
The news of the shooting down of the jet came hours after the US and EU announced significantly tougher sanctions against Moscow over its failure to end fighting in Ukraine.
On Wall Street, the Dow lost 1616 points, or nearly 1%, to close at 16,976, the S&P 500 fell 23.45 points, or 1.2%, to close at 1,958, its biggest fall for three months and came after the index got to within 5 points of its all time high on Wednesday.
The Nasdaq dropped 1.4% or 63 points to 4,363, continuing its sell off which started on Wednesday after US Fed chair, Janet Yellen question the valuations of tech stocks generally.
The yield on the 10-year Treasury bonds dropped sharply as there was a rush to safety by nervy investors (the US dollar rose) and it closed at 2.45%, down a rather large 7 points on the day. Bond yields in Europe also fell in Germany, France and London.
In New York, Comex gold futures naturally jumped (ending the recent sell down).
Metal for August delivery rose 1.3% or more than $US17 an ounce to settle at $US1,316.90. That was the biggest one day rise in a month.
August Nymex crude oil futures rose 1.9% to $US103.14 a barrel, while September Brent crude prices in London, the global benchmark, added 60 cents, or 0.5%, to $US107.77 a barrel.
And wheat futures prices jumped 2.5% in Chicago (ending the big slide of recent months). They ended at $US5.51 a bushel. Ukraine is a major global wheat producer and exporter,along with barely and some other coarse grains and oilseeds.
In Europe, the Euro Stoxx 50 index lost 1.4% overnight, with London down 0.7%, the French market off 1.2%, the German market down 1.1% and the Russian market off 2.3%. The rouble fell 1.7% and yields on Russian bonds closed above 9% for the first time in two months, according to Bloomberg figures.
