LONDON Stirring rhetoric from Western leaders on Syria and Russia’s support for President Bashar al-Assad in the political aftermath of the Khan Sheikhun chemical attack, with British Foreign Secretary Boris Johnson on eloquent form.
But six years into the Syrian war, and without making light of all its horrors, might the big diplomatic push end up being déjà vu all over again?
That question could be answered with U.S. Secretary of State Rex Tillerson’s visit to Moscow, where he will try to persuade Russia to abandon its support for Assad. He and other G7 ministers meeting in Tuscany were still trying to forge a united front on the morning before he was due to leave.
Johnson has called for the G7 to send an unambiguous message to Russia – “do they want to be eternally associated with a guy who gasses his own people?” – and urged sanctions on Russian military leaders.
Any move for increasing wider sanctions, however, could run into opposition from other G7 nations, including Germany. And while the Trump administration appears to be shifting in its policy towards Assad (Trump and British Prime Minister Theresa May agreed in a phone call that a “window of opportunity” exists to persuade Russia to break ties with Assad), Tillerson has also said the U.S. priority is still to defeat Islamic State.
Either way, the Moscow visit will be the former oil executive’s toughest diplomatic test yet, at a time when it is not always clear if U.S. foreign policy is being orchestrated by the State Department or Trump’s offspring.
A curious saga is unfolding in Croatia. Retail tycoon Ivica Todoric rose from being a flower seller to lord of the biggest home-grown business empire in the Western Balkans, living in a hilltop castle outside Zagreb. He has been brought low by the weight of six billion dollars in debts accumulated through a rapid expansion throughout the ex-Yugoslavia.
The jobs of 60,000 people are on the line, and Croatia is scrambling to prevent Agrokor’s collapse. Its fate has huge economic ramifications for the Balkans and could hand Russia a significant lever of power in NATO-member Croatia. Agrokor’s biggest creditor is Russia’s Sberbank.
MARKETS AT 0700 GMT
Political tensions are again the main driver of financial markets, with the Syria, North Korea, U.S.-Russian relations and the looming French election topping investors’ lengthening worry list. European stocks futures are down after falls in Asian shares, low-risk government debt is in demand, as are safe-haven assets such as gold and the Japanese yen.
With little in the way of company news to focus on before first-quarter earnings start to pour in, geopolitics is the dominant theme. The White House said on Monday that U.S. President Donald Trump was open to authorising additional strikes on Syria if there was further use of chemical weapons. MSCI’s main index of Asia-Pacific shares, excluding Japan, is down 0.3 percent. Tokyo shares fell 0.3 percent, also due to the stronger yen. Chinese shares fell 0.1 percent a sub-index of defence stocks is up 4 percent.
European stock movers/company news: LVMH Q1 sales rise 15 percent, says environment uncertain; Givaudan confirms targets as Q1 growth beats poll; JD Sports Fashion says full-year pretax profit up 81 percent; ABB names heads of AMEA, Europe regions; Australia says changes to BHP corporate structure need to fit national interest; Dutch bike maker Accell Group receives 845 million takeover proposal; Vedanta says India unit's zinc output up 40 percent in the fourth quarter.
The dollar is down 0.3 percent at about 110.60 yen per dollar; the euro is down 0.1 percent at $1.0584 and sterling is up slightly at $1.2416 before UK inflation data, which looks like the day’s most important economic indicator. The dollar index is flat.
Benchmark German and U.S. bond yields are both down. Fed Chair Janet Yellen, in a speech on Monday, offered no new details on the timing of rate increases. The premium that investors demand to hold French rather than German debt edged up, after rising on Monday in a move ascribed to the stronger showing of late by far-left candidate Jen-Luc Melenchon before this month’s first round of the presidential election.
Gold edged up 0.2 percent to $1,256 an ounce. Oil prices dipped after rising for six sessions, with rising U.S. shale production blamed. Brent last down 18 cents at $55.80 a barrel.
Emerging stocks slipped 0.3 percent to three-week lows as geopolitical tensions stemming from Syria and North Korea kept investors away from riskier assets. EM stocks are now set for four straight days of losses, their worst losing streak of the year so far. China and South Korea have agreed to impose tougher sanctions on North Korea if it carries out nuclear or long-range missile tests.
The South Korean won continued to sell off, weakening 0.2 percent to three-week lows. But other emerging currencies that have been beaten down in recent sessions made gains against the dollar. The Russian rouble, which was hit hard in the aftermath of the U.S. missile strike on Syria because of its ties to President Assad, firmed 0.3 percent off two week lows.
The South African rand firmed 0.2 percent off three-month lows hit after the country’s credit rating was downgraded by two ratings agencies to junk, and protesters marched demanding President Jacob Zuma’s resignation in the wake of his sacking of Finance Minister Pravin Gordhan. The rand has weakened nearly 12 percent since March 27 when Gordhan was recalled from an investor roadshow. South African manufacturing production is due out today. The central bank governor said on Monday that it was too early to tell if the downgrades would push the economy into recession.
The Turkish lira also firmed 0.2 percent, off near one-month lows hit on Friday. Current account data for February is due today. Turkey’s referendum on constitutional change will be held on April 16 but is thought unlikely to kickstart long-stalled market and investment reforms even if it passes.
Serbia’s central bank has a rate-setting meeting but is expected to keep rates unchanged at 4 percent.
(Editing by Andrew Heavens)