Saturday, 19 August, 2017

North Korea tensions continue to weigh on global stocks

Investors looked for cover after strong words by President Trump causing Japan’s Nikkei to drop Investors looked for cover after strong words by President Trump causing Japan’s Nikkei to drop Eugene Hoshiko AP
Debra Rodriguez | 14 August, 2017, 00:59

"European shares are trading once again lower. continuing their slide on the back of ever more increasing tensions between North Korea and the USA", added analyst Markus Huber at City of London Markets.

Traders took heart in a measure of USA consumer prices that increased only slightly in July, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year. On Thursday, it logged its biggest one-day percentage loss since April 18, when a "snap" United Kingdom general election was called.

"The data confirms the Fed will have a wait-and-see attitude", said King Lip, chief investment officer at Baker Avenue Asset Management in San Francisco.

"What has changed this time is that the scary threats and war of words between the USA and North Korea have intensified to the point that markets can't ignore it", said Shane Oliver, head of investment strategy at AMP Capital in Sydney.

The president continued tweeting on Friday, saying that military solutions to the crisis are "locked and loaded".

At 10:57 a.m. ET (1457 GMT), the Dow Jones Industrial Average .DJI was up 54.38 points, or 0.25 percent, at 21,898.39, the S&P 500 .SPX was up 8.69 points, or 0.35 percent, at 2,446.90.

The Standard & Poor's 500 index fell 24 points, or 0.9 percent, to 2,450.

Spot gold was almost flat at $1,285.76 per ounce at 0447 GMT and was set for a weekly gain of over 2 percent. US stock index futures also fell, with the S&P 500 indicated to open down 0.5 percent ESc1 1YMc1. Hong Kong's Hang Seng Index plunged by 2%, while South Korea's Kospi Index slumped by 1.7%.

Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a sell-off, and the tensions over North Korea have proved the trigger. The VIX rose further on Wednesday, rising as far as 12.11, its highest in nearly a month.

"The typical text book trade is that investors rush for safe havens".

Platinum climbed 0.2 percent to $978.00 per ounce after touching $984.60 during the session, its highest since April 18.

Disappointing US inflation and jobs data have not helped the dollar.

"If the data continues to come in on the softer side, the market might start to price the Fed staying on hold this year", said Sireen Harajli, FX strategist at Mizuho in NY. Yesterday, the TICK opened at around 900-a reading of 1,000 or more means pretty severe selling pressure-and then headed higher throughout the day. The 1.3 percent gain for the market's main other choice for borrowing to fund speculation, the Swiss franc against the euro, is its biggest rise in more than a year. "Whether it is a credit crunch in China, policy error from the Fed, or fear of an over-valued USA stock market, there are many reasons to maintain a balanced multi-asset portfolio that has exposure to defensive asset classes and currencies".

Excluding food and energy prices, core consumer prices still crept up by 0.1% in July, matching the increases seen in the three previous months.

The dollar index, which measures the U.S. currency against a basket of major peers, slipped 0.1 percent.DXY as U.S. Treasury yields fell.

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