The economic calendar looks relatively light today (before China GDP, retail and industrial output tomorrow) meaning that traders and markets have been focusing on the weekend’s Western sorties in Syria and a number of other geopolitical pressures. The solemn worsening situation in Syria and its multi-faceted and far-reaching aftermath include: US’s further sanctioning (expected later today) on Russian companies tied to the production of chemical weapons; the discord within UK parliament on whether Theresa May’s prerogative to join US and France airstrikes goes against the spirit of the parliamentary process (including 15 years of convention) and undermines UN Security Council procedures; it hampers the likelihood of success for the forthcoming summit between North and South Korea and the potential meeting of Kim Jong Un and President Trump; puts pressure on Brent oil prices to remain around the current ~$70 range; it emphasises the urgency for the Organisation for the Prohibition of Chemical Weapons (OPCW) to be allowed to investigate the locations of suspected chemicals attacks; it opens further possibilities for Iran and Israel to deepen their conflict in the Syria region; and it still does little to support the people of Syria in the near-term (who are themselves split, with large protests over the airstrikes gathering in Damascus).
Globally, the rhetoric following the airstrikes demonstrates the polarisation on the issue. NATO Chief Jens Stoltenberg stated that, “All NATO allies back Syria airstrikes” with many other global leaders (including Israel and Turkey) voicing support. However, some like the Iraqi foreign minister and UN Secretary-General António Guterres more stressed the “dangerous consequences” urging “all member states to show restraint”. Those UN permanent members include not just the US, UK and France - but China who called the intervention “a violation of international law” and Russia with Putin asserting the attacks had a “destructive influence on the entire system of international relations”.
Yet, beyond the bombast, all sides seem to have kept their composure and markets have taken this as a positive: with US equity futures up (Dow up 130 points), oil dipping from the highs of last week (Brent had spiked to $73 per barrel) and the Russian rouble seems to be reversing some of its earlier losses. With broad agreement with NATO Chief Stollenberg that, “The use of chemical weapons is unacceptable, and those responsible must be held accountable.” many saw this weekend’s airstrikes as unavoidable. Contrastingly, the market response seems to have recognised restraint from both sides and expect further military escalation is avoidable.