US stocks slip amid heightened US-North Korea tensions

13 August, 2017, 14:58 | Author: Terri Saunders
  • Wall Street fell amid rising tensions between the US and North Korea bringing the Dow Jones’ streak of nine straight record closures to an end

North Korea said it was considering plans to fire missiles at Guam, a USA -held Pacific island, after President Trump's warning on Tuesday.

German bond yields fell, gold and the Japanese yen surged and the leveraged bets on higher-yielding currencies such as the Australian dollar took a beating.

The issue with North Korea led to small increase in gold prices, considered as safe haven. The Swiss franc is a traditional safe haven. This week has seen its biggest rise since June 2016.

"For quite some time the market hasn't really reacted to things on the Korean Peninsula because we know from the past it is largely North Korean sabre-rattling, and it may yet be".

The franc wasn't the only beneficiary to the risk-off sentiment sweeping markets.

USA stocks closed lower on Tuesday after Trump's comments sparked a late afternoon selling. Even so, the close was the highest in a month.

The S&P 500 dropped the most since May and MSCI's gauge of stocks across the globe lost 1.1 percent in its third straight day of declines, as it pulled further back from all-time highs.

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"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. "It's incredible when you consider the headlines just how calm the equity markets are, how they've taken things in their stride", said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.

The dollar index fell 0.1 per cent, with the euro up 0.01 per cent to US$1.175 (RM5.04). Alliance Data Systems fell $6.28, or 2.7 percent, to $225.64. Lockheed Martin, Raytheon, General Dynamics and Northrop Grumman were all up, with the Dow Jones U.S. defense index up 1.48 percent at 409.58.

"This situation is beginning to develop into this generation's Cuban Missile crisis moment", ING's chief Asia economist Robert Carnell wrote in a note. It was last up 0.0 percent at 1.1329 per euro. Travel-review website operator TripAdvisor was down 2.7 percent.

Crude futures meanwhile extended losses on fears of slowing demand and lingering concerns over global oversupply.

Hong Kong and Shanghai followed Tokyo into the red, as China factory gate inflation came in slightly below forecast amid warnings from experts of a further slowdown in the world's second-largest economy.

The S&P 500 .SPX lost 5.99 points, or 0.24 percent, to close at 2,474.92 and the Nasdaq Composite .IXIC dropped 13.31 points, or 0.21 percent, to 6,370.46. While the UK's FTSE 100 Index slid by 0.6%, the German DAX Index slumped by 1.1% and the French CAC 40 Index tumbled by 1.4%. Copper, the bellwether industrial metal, was set for its first weekly drop in five weeks.

News that US producer prices unexpectedly fell in July earlier helped send the dollar lower. The Korea tensions though have seen both US and European markets this week push back expectations of when the Fed and ECB might hike interest rates.

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    North Korea responded by saying it was considering a plan to attack Guam and dismissed Trump's warnings as a "load of nonsense". On Tuesday, the commander in chief said the rogue nation "will be met with fire and fury like the world has never seen ".
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    The Nasdaq finished the day at 6,216.87, a slide of 135.46, while the S&P 500 lost almost 1.5 percent, ending the day at 2,438.21. Investors bought safe-haven assets such as gold, helping the precious metal touch a two-month high, and the Japanese Yen rose.
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    The Japanese currency last traded at 109.07 yen to the dollar, compared to levels around the 110 handle seen earlier in the week. Crude oil futures are slipping USD0.10 to USD48.49 a barrel after tumbling USD0.97 to USD48.59 a barrel on Thursday.


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