Global Markets: West-Saudi tensions lift safe havens; stocks slip

By Rodrigo Campos

NEW YORK (Reuters) - Major stock markets slipped on Monday as rising tensions between Western powers and Saudi Arabia added to concerns over economic growth, with investors flocking to traditional safe havens like the Japanese and Swiss currencies, as well as gold.

Oil prices were little changed as the Saudi-West rift more than offset concerns over slowing demand for oil in the long term.

The yen touched a one-month high versus the greenback and the Swiss franc rose for the fourth session in five while gold hit its highest since late July.

Saudi Arabia's King Salman on Monday ordered an internal probe of the unexplained disappearance of Jamal Khashoggi as a joint Turkish-Saudi team was expected at the Saudi consulate in Istanbul, where the journalist and dissident was last seen on Oct. 2.

 

Turkish police have audio showing Khashoggi was killed at the consulate, sources told Reuters.

Over the weekend, prominent business people, including JPMorgan CEO Jamie Dimon and Ford Chairman Bill Ford canceled plans to attend an investor conference later this month in Saudi Arabia, the world's largest oil exporter.

U.S. crude fell 0.32 percent to $71.11 per barrel and Brent was last at $80.15, down 0.35 percent on the day.

"People had thought the Saudis would make up for the fall in Iran's output. If they are starting to use oil as their weapon, that will be a whole new chapter," said Kazuhiko Fuji, senior fellow at Research Institute of Economy, Trade and Industry, a think-tank affiliated with the Japanese government.

On Wall Street, major indexes were mixed after soft U.S. retail sales data. Apple was among the largest drags after a warning from Goldman Sachs regarding overall consumer demand from China.

The Dow Jones Industrial Average fell 59.82 points, or 0.24 percent, to 25,280.17, the S&P 500 gained 0.97 points, or 0.04 percent, to 2,768.1 and the Nasdaq Composite dropped 25.43 points, or 0.34 percent, to 7,471.47.

The pan-European FTSEurofirst 300 index rose 0.27 percent and MSCI's gauge of stocks across the globe gained 1.10 percent.

Emerging market stocks rose 2.66 percent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 2.35 percent higher.

Japan's Nikkei slumped 1.8 percent after Washington said it would seek a provision about currency manipulation in future trade deals with Japan.

DOLLAR WEAKENS

The dollar softened against major currencies after the weak U.S. retail sales data for September while Treasury yields were little changed after last week hitting their highest level in over seven years.

The euro rose 0.26 percent to $1.1592.

The Japanese yen strengthened 0.37 percent versus the greenback at 111.81 per dollar, while Sterling was last trading at $1.3161, up 0.05 percent on the day.

The Swiss franc rose 0.4300 percent versus the greenback at 0.99 per dollar.

Turkey's lira jumped 1.5 percent to its strongest since mid-August after U.S. President Donald Trump cheered the release of a U.S. pastor who had been under house arrest in Turkey. Investors hope his release can lead to an improvement in strained U.S.-Turkey relations.

Saudi Arabia's riyal currency was still testing the boundaries of its peg at 3.7514 to the dollar - its weakest spot rate since June 2017.

Benchmark 10-year Treasury notes last fell 5/32 in price to yield 3.1576 percent, from 3.141 percent late on Friday.

Last week, the 10-year yield reached 3.261 percent, which was last seen in May 2011, while the 30-year yield hit a four-year peak at 3.446 percent.

"This (Treasury) market sell-off is far from over. The economy is still very strong," said Bryce Doty, senior portfolio manager at Sit Fixed Income Advisors LLC in Minneapolis.

Spot gold added 0.9 percent to $1,227.84 an ounce. U.S. gold futures gained 1.17 percent to $1,232.30 an ounce.

(Reporting by Rodrigo Campos, Karen Brettell and Richard Leong in NEW YORK; additional reporting by Hideyuki Sano in TOKYO and Marc Jones in LONDON; ; Editing by Dan Grebler)