Stocks skid, safe-haven assets jump as U.S. missiles strike Syria

A woman monitors stock market prices inside a brokerage in New Taipei city, Taiwan

By Wayne Cole

SYDNEY (Reuters) – Safe-haven bonds and the yen jumped in Asia on Friday, while stocks fell 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 U.S. dollar dropped three-quarters of a yen in currency markets, while sovereign bonds, gold and oil prices rallied hard.

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.7 percent in short order, and S&P 500 futures lost 0.5 percent in an unusually sharp move for Asian hours. Japan’s Nikkei was stripped of its early gains to slip 0.1 percent.

U.S. 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, a U.S. official said.

Facing his biggest foreign policy crisis since taking office in January, Trump took the toughest direct U.S. 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.”

It was not yet clear if this strike would be the only one, though Secretary of State Rex Tillerson did say the attack was  “proportionate”.

The yen, a favored haven in times of stress due to Japan’s position as the world’s largest creditor nation, climbed across the board. The dollar fell to 110.30 from 110.95 just before news of the attacks hit dealing screens.

The dollar was otherwise unscathed, however, as it benefited from flows into safe-haven U.S. Treasuries. Against a basket of currencies it was barely lower, while the euro held steady at $1.0649.

Yields on 10-year Treasury debt fell five basis points to 2.29 percent, breaking a significant chart barrier at 2.30 percent for the first time this year.

Spot gold prices jumped 1.2 percent to $1,266.01 an ounce and touched their highest since Nov. 10.

“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.

Oil also caught a bid on concerns the military intervention could affect supplies from the Middle East.

U.S. crude jumped 93 cents to $52.63 a barrel, the highest in a month, while Brent added 90 cents to $55.79.

(Reporting by Nichola Saminather; Additional reporting by Herbert Lash; Editing by Shri Navaratnam and Will Waterman)

Trump orders military strikes against Assad airbase in Syria

U.S. Navy guided-missile destroyer USS Ross (DDG 71) fires a tomahawk land attack missile in Mediterranean Sea

By Phil Stewart and Steve Holland

WASHINGTON/PALM BEACH, Fla. (Reuters) – U.S President Donald Trump said on Thursday he ordered missile strikes against a Syrian airfield from which a deadly chemical weapons attack was launched, declaring he acted in America’s “national security interest” against Syrian President Bashar al-Assad.

U.S. officials said the military fired dozens of cruise missiles against the airbase controlled by Assad’s forces in response to the poison gas attack on Tuesday in a rebel-held area.

Facing his biggest foreign policy crisis since taking office in January, Trump took the toughest direct U.S. action yet in Syria’s six-year-old civil war, raising the risk of confrontation with Russia and Iran, Assad’s two main military backers.

“Years of previous attempts at changing Assad’s behavior have all failed and failed very dramatically,” Trump said from his resort in Mar-a-Lago where he was attending a summit with Chinese President Xi Jinping.

Some 50 Tomahawk missiles were launched from U.S. Navy warships, the USS Porter and USS Ross, in the eastern Mediterranean Sea, striking multiple targets – including the airstrip, aircraft and fuel stations – on the Shayrat Air Base, the officials said, speaking on condition of anonymity.

Damage estimates from the strikes, which were conducted at 8:45 p.m. EDT, were not immediately known.

Syrian state TV said that “American aggression” had targeted a Syrian military base with “a number of missiles and cited a Syrian military source as saying the strike had “led to losses.”

Trump said: “Tonight I ordered a targeted military strike on the airfield in Syria from where the chemical attack was launched.

“It is in the vital national security interest of the United States to prevent and deter the spread and use of deadly chemical weapons,” Trump said.

“There can be no dispute that Syria used banned chemical weapons, violated its obligations under the chemical weapons convention and ignored the urging of the U.N. Security Council,” he added.

Trump ordered the strikes just a day after he pointed the finger at Assad for this week’s chemical attack, which killed at least 70 people, many of them children, in the Syrian town of Khan Sheikhoun. The Syrian government has denied it was behind the attack.

Trump appeared to have opted for measured and targeted air attacks instead of a full-blown assault on Assad’s forces and installations.

The relatively quick response to the chemical attack came as Trump faced a growing list of global problems, from North Korea to China to Iran and Islamic State, and may have been intended to send a message to friends and foes alike of his resolve to use military force if deemed necessary.

Shayrat Airfield in Homs, Syria is seen in this DigitalGlobe satellite image released by the U.S. Defense Department on April 6, 2017 after announcing U.S. forces conducted a cruise missile strike against the Syrian Air Force airfield.

Shayrat Airfield in Homs, Syria is seen in this DigitalGlobe satellite image released by the U.S. Defense Department on April 6, 2017 after announcing U.S. forces conducted a cruise missile strike against the Syrian Air Force airfield. DigitalGlobe/Courtesy U.S. Department of Defense/Handout via REUTERS

‘SOMETHING SHOULD HAPPEN’

Trump said earlier on Thursday that “something should happen” with Assad but did not specifically call for his ouster.

Officials from the Pentagon and State Department met all day to discuss plans for the missile strikes.

U.S. military action put the new president at odds with Russia, which has air and ground forces in Syria after intervening there on Assad’s side in 2015 and turning the tide against mostly Sunni Muslim rebel groups.

Trump has until now focused his Syria policy almost exclusively on defeating Islamic State militants in northern Syria, where U.S. special forces are supporting Arab and Kurdish armed groups.

The risks have grown worse since 2013, when Barack Obama, Trump’s predecessor, considered and then rejected ordering a cruise missile strike in response to the use of chemical weapons by Assad’s loyalists.

Only last week, U.S. Ambassador to the United Nations Nikki Haley said the U.S. diplomatic policy on Syria for now was no longer focused on making Assad leave power, one of Obama’s aims.

But Trump said on Wednesday the gas attack in Idlib province, which sparked outrage around the world, had caused him to think again about Assad.

Speaking just before the strikes were announced, Russia’s deputy U.N. envoy, Vladimir Safronkov, warned of “negative consequences” if the United States went ahead with military action, saying the blame would be on shoulders of those who initiated such doubtful and tragic enterprise.

A combination image released by the U.S. Department of Defense which they say shows the impact crater associated with April 4, 2017 Chemical Weapons Allegation released after U.S. cruise missile strike against Syria on April 7, 2017. Courtesy U.S.

A combination image released by the U.S. Department of Defense which they say shows the impact crater associated with April 4, 2017 Chemical Weapons Allegation released after U.S. cruise missile strike against Syria on April 7, 2017. Courtesy U.S. DoD/Handout via REUTERS

The deployment of military force against Assad marked a major reversal for Trump.

Obama’s set a red line in 2012 against Assad’s use of chemical weapons. When Obama then threatened military action after a 2013 chemical attack, Trump issued a series of tweets opposing the idea, including ,Do NOT attack Syria, fix U.S.A.

Obama backtracked on the air strikes, and after the latest attack, Trump was quick to blame his Democratic predecessor for weakness and irresolution that emboldened Assad.

(Additional reporting by Phil Stewart, Yara Bayoumy, Jonathan Landay, John Walcott, Idrees Ali, David Brunstromm and Matt Spetalnick in Washington; Writing by Matt Spetalnick and Jeff Mason; Editing by Yara Bayoumy and Peter Cooney)

Trump says chemical attack in Syria crossed many lines

A crater is seen at the site of an airstrike, after what rescue workers described as a suspected gas attack in the town of Khan Sheikhoun in rebel-held Idlib, Syria. REUTERS/Ammar Abdullah

By Jeff Mason and Tom Perry

WASHINGTON/BEIRUT (Reuters) – U.S. President Donald Trump accused Syrian President Bashar al-Assad’s government of going “beyond a red line” with a poison gas attack on civilians and said his attitude toward Syria and Assad had changed, but gave no indication of how he would respond.

Trump said the attack, which killed at least 70 people, many of them children, “crosses many, many lines”, an allusion to his predecessor Barack Obama’s threat to topple Assad with air strikes if he used such weapons. His accusations against Assad put him directly at odds with Moscow, the Syrian’s president principal backer.

“I will tell you, what happened yesterday is unacceptable to me,” Trump told reporters at a news conference with Jordan’s King Abdullah on Wednesday.

“And I will tell you, it’s already happened that my attitude toward Syria and Assad has changed very much,” though when asked at an earlier meeting whether he was formulating a new policy on Syria, Trump said: “You’ll see.”

Vice President Mike Pence, when asked whether it was time to renew the call for Assad to be ousted and safe zones be established, told Fox News: “But let me be clear, all options are on the table,” without elaborating.

U.S. officials rejected Russia’s assertion that Syrian rebels were to blame for the attack.

Trump’s comments, which came just a few days after Washington said it was no longer focused on making Assad leave power, suggested a clash between the Kremlin and Trump’s White House after initial signals of warmer ties. Trump did not mention Russia in his comments on Wednesday but Secretary of State Rex Tillerson said it was time for Russia to think carefully about its support for Assad.

Pence said the time had come for Moscow to “keep the word that they made to see to the elimination of chemical weapons so that they no longer threaten the people in that country.”

Western countries, including the United States, blamed Assad’s armed forces for the worst chemical attack in Syria for more than four years.

U.S. intelligence officials, based on a preliminary assessment, said the deaths were most likely caused by sarin nerve gas dropped by Syrian aircraft on the town of Khan Sheikhoun on Tuesday. A senior State Department official said Washington had not yet ascertained it was sarin.

Moscow offered an alternative explanation that would shield Assad: that the poison gas belonged to rebels and had leaked from an insurgent weapons depot hit by Syrian bombs.

A senior White House official, speaking on condition of anonymity, said the Russian explanation was not credible. “We don’t believe it,” the official said.

COUNTER-RESOLUTION

The United States, Britain and France have proposed a draft U.N. Security Council resolution that would condemn the attack; the Russian Foreign Ministry called it “unacceptable” and said it was based on “fake information”.

Kremlin spokesman Dmitry Peskov said Moscow would press its case blaming the rebels and Deputy Foreign Minister Gennady Gatilov said Russia would veto the draft if Western nations went to a vote without further consultations, Interfax news agency reported.

Moscow has proposed its own draft, TASS news agency quoted a spokesman of Russia’s U.N. mission, Fyodor Strzhizhovsky, as saying on Wednesday.

The U.S. ambassador to the United Nations, Nikki Haley, issued what appeared to be a threat of unilateral action if Security Council members could not agree.

“When the United Nations consistently fails in its duty to act collectively, there are times in the life of states that we are compelled to take our own action,” she told the council, without elaborating.

Trump described the attack as “horrible” and “unspeakable.” He faulted Obama for failing to carry through on his “red line” threat and when asked if he had responsibility to respond to the attack, said: “I now have responsibility”.

The new incident means Trump is faced with same dilemma that faced his predecessor: whether to openly challenge Moscow and risk deep involvement in a Middle East war by seeking to punish Assad for using banned weapons, or compromise and accept the Syrian leader remaining in power at the risk of looking weak.

While some rebels hailed Trump’s statement as an apparent shift in the U.S. position, others said it was too early to say whether the comments would result in a real change in policy.

Fares al-Bayoush, a Free Syrian Army commander, told Reuters: “Today’s statement contains a serious difference from the previous statements, and we expect positivity … from the American role.

Others who declined to be identified said they would wait and see.

Video uploaded to social media showed civilians sprawled on the ground, some in convulsions, others lifeless. Rescue workers hose down the limp bodies of small children, trying to wash away chemicals. People wail and pound on the chests of victims.

The charity Medecins Sans Frontieres said one of its hospitals in Syria had treated patients “with symptoms – dilated pupils, muscle spasms, involuntary defecation – consistent with exposure to neuro-toxic agents such as sarin”. The World Health Organization also said the symptoms were consistent with exposure to a nerve agent.

“We’re talking about war crimes,” French U.N. Ambassador Francois Delattre told reporters in New York.

Labib Nahhas, chief of foreign relations at Ahrar al-Sham, one of the biggest rebel groups in western Syria, called the Russian statement factually wrong and one which contradicted witness accounts.

“This statement provides Assad with the required coverage and protection to continue his despicable slaughter of the Syrian people,” Nahhas told Reuters.

The incident is the first time U.S. intelligence officials have accused Assad of using sarin since 2013, when hundreds of people died in an attack on a Damascus suburb. At that time, Washington said Assad had crossed a “red line” set by then-President Obama.

Obama threatened an air campaign to topple Assad but called it off at the last minute when the Syrian leader agreed to give up his chemical arsenal under a deal brokered by Moscow, a decision which Trump has long said proved Obama’s weakness.

SAME DILEMMA

The Western-drafted U.N. Security Council resolution condemns the attack and presses Syria to cooperate with international investigators. Russia has blocked seven resolutions to protect Assad’s government, most recently in February.

Trump’s response to a diplomatic confrontation with Moscow will be closely watched at home because of accusations by his political opponents that he is too supportive of Russian President Vladimir Putin.

U.S. intelligence agencies say Russia intervened in the U.S. presidential election last year through computer hacking to help Trump defeat Hillary Clinton. The FBI and two congressional committees are investigating whether figures from the Trump campaign colluded with Moscow, which the White House denies.

Trump’s relationship with Russia has deteriorated since the presidential election campaign, when Trump praised Putin as a strong leader and vowed to improve relations between the two countries, including a more coordinated effort to defeat Islamic State in Syria.

But as Russia has grown more assertive, including interfering in European politics and deploying missiles in its western Kaliningrad region and a new ground-launched cruise missile near Volgograd in southern Russia – an apparent violation of the 1987 Intermediate Nuclear Forces (INF) Treaty – relations have cooled, U.S. officials have said.

The chemical attack in Idlib province, one of the last major strongholds of rebels, who have fought since 2011 to topple Assad, complicates diplomatic efforts to end a war that has killed hundreds of thousands of people and driven half of Syrians from their homes.

Over the past several months, Western countries, including the United States, had been quietly dropping their demands that Assad leave power in any deal to end the war, accepting that the rebels no longer had the capability to topple him by force.

The use of banned chemical weapons would make it harder for the international community to sign off on any peace deal that does not remove him. Britain and France on Wednesday renewed their call for Assad to leave power.

(Additional reporting by Maria Tsvetkova and Polina Devitt in Moscow; Michelle Nichols at the United Nations and Lesley Wroughton and Steve Holland in Washington; writing by Peter Graff, Philippa Fletcher and Yara Bayoumy; Editing by Sonya Hepinstall, Louise Ireland and Lisa Shumaker)

Conference on Syria overshadowed by chemical attack

European Union foreign policy chief Federica Mogherini takes part in a joint news conference during an international conference on the future of Syria and the region, in Brussels, Belgium, April 5, 2017. REUTERS/Yves Herman

By Robin Emmott and Gabriela Baczynska

BRUSSELS (Reuters) – The European Union’s aid chief called for more humanitarian access in Syria on Tuesday at an international conference meant to support the country’s ailing peace prospects, but one that quickly got overshadowed by a chemical attack inside Syria.

As Christos Stylianides spoke at the gathering in Brussels, a suspected gas attack hit the rebel-held Idlib province, killing at least 58 people, including children.

The United Nations’ Syria envoy said the ‘horrific’ attack came from the air and that the U.N. Security Council would meet to demand accountability.

The EU’s top diplomat Federica Mogherini said Syrian President Bashar al-Assad held “primary responsibility”.

“Chemical weapons are the worst of war crimes,” she said.

The Brussels conference comes as Syria’s civil war enters its seventh year, raging on in large part due to the inability of regional and global powers to agree on how to end it.

“Humanitarian access is at a new low due to continued deliberate obstruction by all parties to the conflict,” Stylianides told the two-day conference.

“You remember east Aleppo, where no aid could enter for months despite our collective calls,” he said, referring to the government siege of rebel-held areas last year. “More Aleppos are everywhere in Syria.”

The United Nations has appealed for $8 billion this year to deal with one of the world’s worst humanitarian crises, with millions of people displaced inside Syria and in neighboring countries.

Qatar and Kuwait joined the EU, Norway and the United Nations to organize the latest international effort following conferences in Berlin, London and Helsinki to raise funds.

The European Union has already pledged 1.2 billion euros ($1.28 billion) for 2017. Other governments will come under pressure to make good on promises made in February 2016 at the London conference, which raised $11 billion over four years.

EU LACKS HARD LEVERAGE

Speaking on the sidelines of the conference, Nancy Wilson, the head of Relief International, said problems getting access and providing supplies were chief obstacles on the ground.

“You can’t run a health clinic if you don’t have clean water and medical supplies,” she said. “Some kind of political solution that would cease the fighting would be the biggest challenge.”

The EU called the conference to show support for the peace process by bringing together prime ministers, foreign ministers and ambassadors from some 70 countries.

But the bloc’s role in international attempts at bringing the war to an end has been largely marginal, as highlighted again by the absence in Brussels of top-level officials from Russia, Turkey and the United States.

Five million Syrians have fled into Turkey, Lebanon, Jordan, Iraq and the European Union to escape the conflict among rebels, Islamist militants, government troops and foreign backers.

The future of Assad, backed by Russia and Iran, remains the key point of contention, blocking political talks.

The EU says it will not pay for any post-war reconstruction unless there is a “credible political transition” that would give the opposition, moderate rebels and the various ethnic and religious groups a say in Syria.

“We caution against paying for Assad’s destruction without a political end to the war,” said European lawmaker Mariejte Schaake of the Netherlands.

The initial U.S. and Russian backing for the U.N.-led process has waned as Moscow now sponsors separate talks with regional powers Iran and Turkey.

Washington is now also at odds with Europe – while they used to agree that Assad must go, President Donald Trump has made fighting terrorism his top priority instead.

(Additional reporting by Farah Salhi; Writing by Gabriela Baczynska; Editing by Andrew Bolton)