European markets end lower amid geopolitical tensions

13 August, 2017, 16:24 | Author: Brenda Erickson
  • Dollar slumps Tokyo tanks as North Korea tensions spike

The U.S. dollar inched up against the Japanese yen and the Swiss Franc on Friday, erasing earlier losses, after Russian Foreign Minster Sergei Lavrov said there was a Russian-Chinese plan to defuse tensions between the United States and North Korea.

The modest rebound came at the end of a turbulent week on Wall Street as escalating tensions between the US and North Korea rattled global markets.

The CBOE Volatility Index - a measure of investors' expectations for swings in the S&P 500 over the next 30 days - surged Thursday to its highest level since U.S. Election Day.

"If earnings can stay strong and interest rates remain low investors can look beyond North Korea and continue to rally equities", Phipps said. "That did temporarily shake investors' complacency, but we think markets are ready to move higher in the back half of the year, and earnings and economic data are going to drive that".

Sterling was last trading at $1.3013, up 0.30 percent on the day.

For the week, the Dow is down 1.1%, its biggest one-week drop since November.

The Dow industrials rose 14.31 points, or less than 0.1%, to 21858.32 on Friday.

The pan-European FTSEurofirst 300 index lost 1.06 percent and MSCI's gauge of stocks across the globe shed 0.17 percent.

The recovery fit a recent pattern of investors using dips to put more money in stocks.

The major averages all closed in positive territory, although the tech-heavy Nasdaq outperformed its counterparts. With the sell-off on the day, the Nasdaq and the S&P 500 fell to their lowest closing levels in a month.

Tensions between the US and North Korea continued to simmer early Friday.

Trump's words were in response to North Korea threatening to attack USA territory Guam.

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The reclusive state raised the stakes further with a detailed plan to send a salvo of missiles towards the USA territory of Guam.

Still, there were fewer signs of anxiousness in the markets Friday. It's still the highest it's been since May.

Investors also drew some encouragement from government data showing US inflation at the consumer level only inched higher in July.

A small rise in a measure of USA consumer prices pointed to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year, which would be favorable to equity investors.

Apart from geopolitical worries, some technical analysts like Tom McClellan, editor of the McClellan Market Report, blamed seasonality for this week's retreat given August's record as a weak month for stocks.

The hope that the Fed will have to slow its rate-hike path appeared to stop, at least for now, the near $1-trillion loss in world stocks valuations this week triggered by the war of words between Pyongyang and Washington. But some economists say the Fed may stand pat for the rest of 2017 unless inflation accelerates in coming months.

"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.

Seagate Technology gained 2.3 percent after investor ValueAct disclosed that it had acquired a 7.2 percent stake in the digital storage company. The stock lost 78 cents to $3.93. For the week, the benchmark slipped 2.6%.

USA crude fell 0.41 percent to $48.39 per barrel and Brent was last at $51.68, down 0.42 percent on the day.

In commodities trading, crude oil futures are slipping USD0.10 to USD48.49 a barrel after tumbling USD0.97 to USD48.59 a barrel on Thursday. Silver gained 1 cent to $17.07 an ounce.

But losses soon resumed, with Tokyo edging down as the Nikkei again came under pressure from the strength of the safe-haven yen, which hit eight-week highs Wednesday against the dollar.

The dollar index .dxy fell 0.39 percent, with the euro up 0.48 percent to $1.1827. Britain's FTSE 100 was down 1.1 percent. Australia's S&P/ASX 200 dropped 1.2 percent. The Japanese markets were closed for a holiday.

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