Investors flee to gold,
German bonds as political worries rise
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[June 06, 2017]
By Abhinav Ramnarayan
LONDON
(Reuters) - World stocks fell while safe-haven gold and German
government bonds were in demand on Tuesday as tension in the Middle
East, an election in Britain and upcoming testimony from the former head
of the FBI pushed investors away from risky assets.
European stocks fell early on Tuesday after leading Arab powers cut ties
with Qatar the previous day, accusing it of supporting Islamist
militants and Iran.
Shares fell in U.S. and Asian trading on the back of concerns over
politics either side of the Atlantic.
On what BayernLB analysts called "Super Thursday", British voters will
go to polls in an increasingly unpredictable general election, the
European Central Bank is due to meet and later the same day former FBI
director James Comey will testify before Congress.
"We have a big week or so ahead of us with the UK heading to the polls
and the ECB announcing its latest monetary policy decision on Thursday
and the Federal Reserve doing the same next Wednesday," said Craig Erlam,
a market analyst for OANDA securities.
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"Once these events pass, we may have a little more clarity and therefore
see a little less caution in the markets."
The diplomatic spat in the Middle East left oil prices hovering just
below $50 a barrel and that in turn hit European stocks, which fell
across the board; the broad Euro STOXX 600 was down 0.4 percent.
World stocks edged further away from record highs hit last week, the
MSCI world equity index <.MIWD00000PUS>, which tracks shares in 46
countries, fell 0.12 percent.
Investors instead bought gold and German government bonds - two of the
safest assets in the world - pushing gold prices to six-week highs and
German 10-year borrowing costs to six-week lows.
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![](../images/060617pics/busine37.jpg)
A worker shelters from the rain under a Union Flag umbrella as he
passes the London Stock Exchange in London, Britain, October 1,
2008. REUTERS/Toby Melville/File Photo
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Erlam said the one area for concern is how steady sterling has been -
the currency was up against the dollar and euro on Tuesday - potentially
a sign of complacency before the election.
The lead of British Prime Minister Theresa May over the opposition
Labour Party ahead of Thursday's general election has narrowed to just 1
percentage point, according to a poll conducted before the attacks in
London on Saturday.
Other polls in recent days have found bigger leads for the Conservatives
of up to 11 and 12 points.
Sterling edged higher against both the dollar and the euro.
The dollar, meanwhile, touched a seven-month low ahead of Comey's
testimony.
Reports suggest the former FBI chief plans to talk about conversations
in which U.S. President Trump pressured him to drop his investigation
into former national security adviser Mike Flynn, who was fired for
failing to disclose conversations with Russian officials.
The dollar index <.DXY>, which tracks the currency against a basket of
trade-weighted peers, fell to its lowest level since the November U.S.
election.
Data on Monday of U.S. services sector activity slowing in May as new
orders tumbled also hit the greenback.
(Additional reporting by Nichola Saminather; Editing by Raissa
Kasolowsky)
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