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Investors seek safety in bonds, yen after Russia jet downed

The dollar fell against the traditionally safe-haven Japanese yen and Swiss franc, helping push oil and metals prices higher

Agencies  |  London 

Investors sought safety in low-risk government debt on Tuesday after Turkish jets shot down a Russian warplane near the Syrian border, while European tourism-linked stocks fell after a US travel warning due to "increased terrorist threats".

It was the first time a NATO member's armed forces had shot down a Russian or Soviet military aircraft since the 1950s.

Russia said its plane had been downed over Syria.

The dollar fell against the traditionally safe-haven Japanese yen and Swiss franc, helping push oil and metals prices higher.

Wall Street looked set to follow European shares lower , according to index futures.

Yields on 10-year US Treasuries hit a three-week low at 2.21 per cent and two-year German yields dipped below -0.4 per cent for the first time.

Turkish shares fell 1.4 per cent and the lira lost one per cent against the dollar. Russian stocks and the rouble also fell.

The prospect of escalating tension between the former Cold War foes gave an additional push lower to German yields.

Two-year debt last yielded -0.39 per cent, having earlier hit a record low of -0.401 per cent. Ten-year Bund yields fell 3.5 bps to 0.5 per cent.

Brent crude rose 53 cents to $45.36 a barrel, also lifted by Saudi Arabia's pledge on Monday to work towards a stabilisation of oil prices.

The pan-European FTSEurofirst 300 index fell 1.3 percent. The early damage was down by a 10 percent fall in Zodiac Aerospace after the company reported a 44.6 percent fall in annual earnings.

Travel and leisure stocks were under pressure after the US State Department warned US citizens of the risk of worldwide travel posed by what it called increased terrorist threats.

"Investors should stay cautious in the near-term as the threat of terror attacks are spreading to other parts of the world. The US travel alert further highlights investors' caution. These concerns could have a further negative impact on fresh travel bookings," said Koen De Leus, senior economist at KBC, in Brussels.

Budget airline easyJet lost 2.9 per cent, British Airways owner IAG fell 3.3 per cent and tour operator TUI dropped 2.5 per cent.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan wavered in and out of positive territory, and was last down 0.1 per cent.

Japan's Nikkei ended a choppy session with a 0.2 per cent gain, after being closed on Monday for a holiday.

China's Shanghai Composite index closed up 0.2 per cent while the CSI300 ended almost flat.

US stock-index futures declined after Turkey said it shot down a Russian warplane, while investors await data for further indications of the strength of the world's biggest economy.

Standard & Poor's 500 Index E-mini contracts expiring in December dropped 0.5 percent to 2,073.5 at 7:27 a.m. in New York, after earlier slipping as much as 0.9 per cent. Futures on the Nasdaq 100 Index lost 0.5 per cent, while Dow Jones Industrial Average contracts fell 81 points, or 0.5 per cent, to 17,681.

The dollar dipped 0.2 per cent against a basket of currencies, having hit an eight-month peak on Monday on expectations of an imminent rise in US interest rates.

Yen, Swiss Franc sought

The euro was up 0.1 percent at $1.0644, having fallen as low as $1.0592 on Monday, the yen was up 0.2 percent at 122.56 per dollar and the Swiss franc was up 0.1 percent at 1.018 per dollar.

"(An) intensification (of tension) could at least prompt some lightening up of long dollar bets and support traditional safe havens like yen," said Josh O'Byrne, strategist at Citi.

Gold rose 0.3 percent to $1,074.75 an ounce but near a 6 1/2-year low hit last week. Platinum hit its lowest since December 2008 at $831.80 and was last at $842 per ounce.

Copper rose 0.4 percent to $4,507 per tonne but, along with aluminium, lead and nickel, remained close to multi-year lows, weighed down by the prospect of higher US interest rates and ebbing Chinese demand.

First Published: Tue, November 24 2015. 22:46 IST