Nervous investors head for safe haven assets following Trump's Syria strike
Safe-haven bonds and the yen jumped in Asia on Friday as stocks slipped after the United States launched cruise missiles against an air base in Syria, raising the risk of confrontation with Syrian backers Russia and Iran.
The US dollar dropped half a yen, while gold and oil prices rallied hard, though dealers said the early panic calmed when a US official called the attack a "one-off".
MSCI's broadest index of Asia-Pacific shares outside Japan were down 0.5pc but above the early low.
E-mini S&P 500 futures lost 0.3pc in an unusually sharp move for Asian hours, but Japan's Nikkei reversed course again to be up 0.4pc.
President Donald Trump ordered the strikes against a Syrian air base controlled by President Bashar al-Assad's forces in response to a deadly chemical attack in a rebel-held area on Tuesday, a U.S. official said.
Facing his biggest foreign policy crisis since taking office in January, Trump took the toughest direct US action yet in Syria's six-year-old civil war.
Investors had already been on edge as Trump met Chinese leader Xi Jinping for talks over flashpoints such as North Korea and China's huge trade surplus with the United States.
"While President Trump had flagged a response to this week's chemical attack in Syria, the swiftness of the response and the willingness to take action halfway through the Trump-Xi meeting caught markets a little off-guard," said Sean Callow, senior currency strategist at Westpac in Sydney.
"There should be limited market follow-through, however, with no indication at this stage that this is the start of a broad-based, sustained U.S. military campaign."
Secretary of State Rex Tillerson noted the attack was "proportionate", suggesting no follow-up was planned.
HIGHS FOR OIL AND GOLD
The yen, a favoured haven in times of stress due to Japan's position as the world's largest creditor nation, climbed across the board. The dollar was down to 110.50 against the yen, from 110.95 before news of the strike, but up from a 110.14 trough.
The dollar was otherwise unscathed, however, as it benefited from flows into safe-haven US Treasuries. Against a basket of currencies it was barely lower, while the euro held steady at $1.0645.
Yields on 10-year Treasury debt fell as much as five basis points to 2.29pc, briefly breaking a significant chart barrier at 2.30pc for the first time this year. It was last at 2.31pc.
Oil also rose on concerns the military intervention could affect supplies from the Middle East.
"What will be the response of Iran and Russia, two of the world's largest oil producers and staunch allies of the Assad regime? ... We will have to wait for these answers as the day moves on," said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
US crude rose 78 cents to $52.48 a barrel and briefly touched its highest in a month, while Brent climbed 79 cents to $55.49.
Spot gold prices added 0.9pc to $1,263.11 an ounce and touched their highest since November 10th.
"Clearly this raises the stakes, and we expect to see gold prices continuing to push higher in the short term, at least until there is some clarity around whether this is a one-off or develops into something more," ANZ analyst Daniel Hynes said.