Precious metals except for palladium were sharply lower in news that the Syrian government has accepted a Russian proposal for surrendering its chemical weapons stockpile to the international community for destruction. The Syrians agreed to the proposal to ward off threatened U.S. military attacks. President Obama insists that the Syrian government was behind last month’s chemical attack in a Damascus suburb; a claim the Assad government denies.
Obama is scheduled to address the nation tonight to sell his case for attacking Syria, as he confronts an American public that is mostly against unilateral military action.
News of the Syrian agreement to surrender its chemical weapons stockpiles sent oil prices down as well. Global equities are benefiting from more upbeat economic news out of China, where industrial output improved at the fastest pace since March 2012, and retail sales showed their strongest growth of the year. The dollar gained overnight, as the Chinese news reinforces the thought that the global economy is seeing a broad improvement. This could help induce the Federal Reserve to begin tapering its $85 billion a month in bond purchases. This would help the dollar by reducing devaluation concerns.
In Tokyo, the yen fell as people unwound their safe haven bets on perceptions the Syrian crisis is winding down. The Nikkei is still flying high over news that Japan has won the rights to host the 2020 Olympic Games, hitting a 5-1/2 week high. China shares added to yesterday’s gains, rising over 1%, while the Hang Seng in Hong Kong also rose, just shy of 1%.
Euro stocks hit a 3-month high on the China news and Syria de-escalation, but gains were muted over continued threats by Silvio Berlusconi to bring down Italy’s coalition government if he is stripped of his Senate seat over his criminal conviction for tax evasion.
Wall St. opened higher on the Chinese and Syrian news, as well. 10-year Treasury yields are up to 2.96%, as a reduction of safe haven demand coupled with taper concerns softens the bond market.
Now that Syria seems to be receding to the back burner, the eyes of markets worldwide are even more sharply focused on the Federal Reserve Open Market Committee meeting scheduled for next Tuesday and Wednesday.