FTSE sell-off gathers strength on North Korea fears

12 August, 2017, 23:44 | Author: Terri Saunders

With Japanese markets closed for a public holiday, Hong Kong led the downward charge in Asia-Pacific as the Hang Seng lost more than two percent.

Japan's benchmark Nikkei 225 inched down less than 0.1 percent to finish at 19,729.74. Sydney's S&P-ASX 200 gained 0.5 percent to 5,773.70 while New Zealand also rose.

Investors have been jittery about North Korea since Tuesday when Trump said any threats from Pyongyang would be "met with fire and fury like the world has never seen". The reclusive state raised the stakes further with a detailed plan to send a salvo of missiles towards the U.S. territory of Guam.

Trump's threats have escalated since reports broke at the beginning of the week that North Korea had successfully produced a nuclear warhead that could fit inside its missiles.

The CBOE Volatility Index, the most widely followed barometer of expected near-term stock market volatility, was up as much as 12.63 points, its highest in more than a month.

Neil Mellor, a currency strategist with Bank of New York Mellon in London, said the pound was "drifting towards the lows from last month against the dollar".

"The market's dent only lasted for a week in April when tension rose between them after North Korea launched a missile".

"The war of words between the leaders of the USA and North Korea continues to dominate investor sentiment", said Forex.com technical analyst Fawad Razaqzada. "They may increase the market's volatility for a couple of days".

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The bigger surprise is that the cost to protect against declines in the kiwi against the USA dollar for one month shot up to the most expensive levels since April.

The tentative gains "suggest that the headline shock value pertaining to the US-North Korea standoff is starting to dissipate, which is to say actual action will now speak much louder than words", said Briefing.com analyst Patrick O'Hare.

Significant strength was also visible among software stocks, as reflected by the 1.2 percent gain posted by the Dow Jones Software Index. The Nasdaq composite lost 0.2 percent, to 6,370.46. The number of people quitting their jobs also dropped.

South Korea's KOSPI .ks11 fell 1.7 percent on Friday to its lowest level since May 24, but its losses for the week are a relatively modest 3.2 percent.

Gold extended gains after data showed USA producer prices unexpectedly fell in July, recording their biggest drop in almost a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.

If the North Korean regime "does anything" to the United States or a USA ally "things will happen to them like they never thought possible", he told reporters on Thursday, according to Bloomberg.

North Korea has said it may attack Guam in retaliation.

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