United States stock futures, dollar slip on rising Korean tensions

13 August, 2017, 05:43 | Author: Terri Saunders
  • By Saqib Iqbal Ahmed

Japanese markets were closed for a holiday but the tense mood dragged Asian shares lower and an MSCI index of stocks across the globe was on track to post its largest weekly drop since the week before Donald Trump won the US presidential election in November.

"Meanwhile, Trump knows that a conflict in North Korea could risk a huge amount of casualties and a huge humanitarian crisis on China's doorstep".

President Donald Trump said on Tuesday that US threats from Pyongyang would be met with "fire and fury", which prompted North Korea to say it was considering plans for a missile strike on the USA pacific territory of Guam.

Baker Avenue's Lip said the USA market was higher due to "bargain hunters", but "there's more room for the market to come down".

The MSCI World index dropped 1.1 percent overnight in its third straight day of declines and its biggest 1-day slide since May 17, as US President Donald Trump stepped up his rhetoric against North Korea.

The broad-based S&P 500 was hit even harder, dropping 1.5 percent to close at 2,438.22, while the tech-rich Nasdaq Composite Index lost 2.2 percent 6,216.87.

Emerging market stocks lost 1.28 percent.

The index was also dragged lower after Beijing ordered probes into three major Chinese social networking platforms over outlawed content.

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

Many markets have recently climbed to record or multiyear highs, leaving them vulnerable to a sell-off.

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"The latest threats over North Korea have finally escalated to the point where market has been obliged to react", Ric Spooner, chief market analyst at CMC Markets, wrote in a note.

The Japanese yen hit an eight-week high against the USA dollar, while spot gold also reached a two-month high.

Benchmark 10-year notes last rose 5/32 in price to yield 2.2255 percent, from 2.242 percent late on Wednesday.

The CBOE Volatility index, the most widely followed barometer of expected near-term U.S. stock market volatility, rose the most in about 12 weeks.

"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. It was trading at 109.16 yen, after retreating 0.8 percent on Thursday.

Weakness in US Treasury yields may also be supporting the yen, some analysts said. Core prices had been expected to rise by 0.2%.

The 30-year bond last /32 in price to yield 2.7933 percent, from 2.794 percent late on Thursday. USA gold futures gained 0.26 percent to $1,293.50 an ounce.

Elsewhere in commodities, the September crude contract was up 39 cents to US$49.56 per barrel, September natural gas advanced six cents at US$2.88 per mmBTU and the September copper contract declined two cents at US$2.93 a pound.

Markets saw a tentative recovery in risk appetite in overnight USA and early Asian trading, but anxiety mounted again as Asian stocks fell back and London, Frankfurt and Paris dropped 0.5-1.2 percent in Europe.

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