"The most dangerous moment for the world since the end of the Cold War" , say commentators

ref :- Market round-ups, various (Bloomberg, Reuters etc) The sight of superpowers squaring up to each other amid a welter of threats and sanctions is thankfully not one we've seen for a while. It used to happen during the Cold War of course, and you suspect that if that old showman Nikita Krushchev was still around he'd have been banging his shoe at the UN by now. But having become used to something less overtly antagonistic since the break-up of the old Soviet Union, you'd think that to descend once again to that level with missile strikes already a reality must be hugely disturbing for all, not least because of the nature of two presidents at the helm of the principal protagonists. Apparently not ..... at least not for markets. They appear to have already taken the view that the lack of immediate response to attacks by the US, France and the UK on Syrian targets alleged to be involved in the manufacture of chemical weapons means that wider fallout will be limited. We hope they're right, of course .... but at this stage that seems like an awfully big assumption to make. Still, we shouldn't be surprised. The long bull run in equities in particular has regularly been marked by examples of how investors can swiftly shrug off bad news and concentrate on the positive. That's not always a healthy way to be, and some would say that the central bank actions that have suppressed bond yields amid a flood of liquidity have caused asset price bubbles in which investors have become blasé about downside risk. As it happens, the market action action since the start of the February fallout suggests that markets may no longer be quite as blasé as they were but you wouldn't recognize that from this morning's action. Stocks in Asia are mixed while bourses in Europe are broadly unchanged, not really what one might expect of a reopening after a weekend in which the US and its partners have been firing off missiles at assets belonging to a firm ally of Russia. US equity futures are actually higher this morning, with more chat about the upcoming corporate earnings season than about matters Syrian. Of the classic safe-havens, the Swissie may be a fraction stronger but a weaker Jap Yen suggests that more attention is being paid to poor approval ratings for PM Abe than to the Middle East. Government bond prices are actually lower (yields higher), and even Gold has given up a couple of bucks. Most counter-intuitive of all, crude oil has been marked up to a dollar per barrel lower, with more emphasis being put on the dangers of increased production (esp. US shale oil) than on the chances of a wider escalation of conflict in Syria. It certainly seems as though the markets are accepting the view that the attacks were limited and highly specific in its choice of targets, and that the US and its allies have no interest in getting involved in Syria's civil war or in bringing about regime change. That's probably true as far as it goes, but the question must be whether that's an explanation that Russia is prepared to accept. And what happens if further action is considered necessary at some point ? Just because Russia has so far let some time go by without any specific response beyond rhetoric, it doesn't mean that will always be the case and the raft of new sanctions being imposed on Russia are unlikely to make Mr Putin any less supportive of President Assad's regime. Mr Trump announced "Mission accomplished ! ", probably in the hope of persuading the other side that he has no plans to go any further if they behave themselves from now on. The market may be acting this morning as though it's worked and that the danger has passed, but such a conclusion seems decidedly premature and we wouldn't be reinstating too many "Risk-on" strategies just yet. Too cautious ? Let's hope so .....

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