WASHINGTON, Nov. 24, 2015 – Just when we were hoping to limit posts for the holiday week, Wall Street was hit again with troubling headlines this morning. A Russian SU-24 combat jet that apparently had strayed into Turkish airspace was shot down by the Turkish Air Force, marking the first time a NATO power has downed a Russian plane since the end of the Korean War in 1953.
Russian president Vladimir Putin has already declared the Turkish action to be “a stab in the back.” According to a breaking report on CNBC via Reuters, Putin said the incident “would have serious consequences for Moscow’s relations with Ankara.” Regardless of those “consequences,” U.S. markets reacted negatively to the news, with most stocks down on light pre-holiday trading, but with oil and metals catching a usually predictable bid under the circumstances.
More from the CNBC report, which appears to have largely relied upon Reuters:
“Speaking in the Russian Black Sea resort of Sochi before a meeting with Jordan’s King Abdullah, Putin said the downed plane, which Turkey said it had repeatedly warned, had been attacked inside Syria when it was one kilometer from the Turkish border and had come down four kilometers inside Syria, according to Reuters.
“The incident happened after it reportedly entered Turkish airspace, increasing tensions between the two countries.
“State-run Turkish news service Anadolu Agency said that the downed warplane was a Russian-made SU-24 and had been engaged by two Turkish F16 jets. It said the plane had been downed in line with Turkey’s rules of engagement after violating Ankara’s airspace. The Turkish F16s warned the jet over the airspace violations before shooting it down, the military official told Reuters.”
Although we still regard Vlad as a dictator and a thug, we have to give him grudging credit for at least doing something about the Syrian mess, albeit likely the wrong thing, encouraging Assad and the Iranians to hang on and persist in their evil ways. That said, not doing so, apparently, encourages ISIS to do the same.
There appear to be no really good actors in this growing Middle Eastern powder keg, and it’s making investors and HFTs increasingly nervous about carrying their positions through the U.S. holiday weekend when trading is either closed or restricted. This would prevent them from quickly escaping from their positions should all hell break loose.
Oil and precious metals usually are heavily bought in circumstances such as these, and that’s what’s been happening Tuesday morning. Gold, silver and even beleaguered copper are up sharply, and both West Texas Intermediate (WTI) and Brent crude are up roughly a buck at 11 p.m. EST sitting at $42.62 and $45.75, a good 2 percent gain.
That’s the usual reaction we’d expect in this sector when international confrontations look like they may be getting out of hand. Lately, however, sometimes the opposite has occurred, a clear sign that precious metals, at least, continue to be strongly manipulated by persons and organizations unknown.
Tuesday, however, good old-fashioned headline fear has assumed its usual place. How long this mood will last, nobody knows. But then again, commodities could use a bid for any reason in this uneven market.
Everything else seems headed down, more or less, although related precious metals miners like Newmont (NMT), which we own, are tracking with the underlying metals.
We’re going to cut it short here because, aside from the nasty headlines coming out of Syria and Turkey, volume tells us that traders are gradually bailing and heading for parts unknown to get ready for Turkey Day, leaving plenty of deceased turkeys strewn about the floor of the New York Stock Exchange.
For the rest of this week, light volume will make any market read virtually useless, but we’ll continue to drop by with any news that might affect individual portfolios, just as we did today.
Have a pleasant and safe afternoon.