Geopolitical Tensions Between India and Pakistan Affects European Stock Market

The recent India-Pakistan disputes have resulted in a drop in European stock markets, which have spurred investors to turn to ‘safer’ Asian assets such as the Japanese Yen.

New Delhi and Islamabad are engaged in a battle of conflicting military claims. In response to Pakistan’s JeM-led suicide car bombing and attack on the Indian military on February 14, where at least 42 Indian paramilitary forces were killed, India launched air raids on what it said was a JeM training base. Pakistan now ‘claims’ to have shot down two Indian fighter jets in the Pak military air space and captured two Indian pilots, which India denied, as per media reports.

After an hour or so passed since the European stock markets opened on Wednesday, the pan-European STOXX 600 dropped by about 0.5 percent, and the main regional indexes were operating at a loss, with [EU] US stock futures for the S&P 500 being down by 0.1 percent.

Wednesday witnessed a drop in both Indian and Pakistan bonds and currencies as well as in MSCI’s broadest index of Asia-Pacific shares (barring Japan), which fell down 0.15 percent. Charles St-Arnaud, a strategist at Lombard Odier, if of the opinion that this “adds another layer of risks for investors,” and observed that the market moves stood restricted for the time being.

The US-North Korean Summit in Hanoi, where US President Donald Trump and North Korean leader Kim Jong Un would meet to discuss North Korea’s agenda on the nuclear weapons program, is also being carefully observed by the world and has made the Japanese Yen gained against the dollar owing to investors considering assets more reliable than stocks, especially in these times of heightened geopolitical tensions.