Published: Sat, August 12, 2017
Business | By Max Garcia

North Korea Has Markets Nervous But Not Panicked

North Korea Has Markets Nervous But Not Panicked

Wall Street put a floor under global equities on Friday after a weak inflation reading brought investors back into USA stocks even as tensions between the United States and North Korea continued to escalate, though the geopolitical fears still drove safe-haven buying of gold and the yen.

The S&P 500 index dropped 35.81 points to 2,438.21, while the Nasdaq composite index slid 135.46 points to 6,216.87.

Nervous investors drove shares lower earlier in the week, after President Trump declared Tuesday that the US would react with "fire and fury" to further nuclear provocations from North Korea. He said that North Korea "can be very very nervous" if it acts on either the U.S. or its allies, and warned that "things will happen to them like they never thought possible".

THE QUOTE: "Risk-averse sentiment is dominating global equities markets, and USA indices have retraced from record levels over the last two days".

ASIA'S DAY: The earlier Asian session was heavily influenced by the sabre-rattling between the US and North Korea. "Although it is considered highly unlikely that this tension will escalate into a nuclear war, the market still needs to see how President Trump will eventually deal with his advocating "fire and fury" against North Korea's threat", said Margaret Yang Yan, market analyst at CMC Markets Singapore.

European equity markets continued to lose ground on Thursday which provided further net support to gold, especially with bond yields tending to drift lower.

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.

A Reuters Datastream index of more than 7,000 stocks across the globe saw its market capitalisation drop from a record high $61.36 trillion on Monday to $60.43 trillion at the close on Thursday.

Later in the session dollar traders will be busy monitoring producer prices in the United States, ahead of the key inflation figure tomorrow.

London's FTSE 100 dipped by about 90 points, or more than 1%, in morning trading on Friday, adding to a slump of more than 100 points the day before and taking it to its lowest level since May.

The latest US CPI data will also be an important market focus on Friday and there will be a constant threat of choppy trading conditions given a lack of liquidity.

Gold is sensitive to moves in USA rates, which lift the opportunity cost of holding non-yielding assets such as bullion.

The Japanese yen last strengthened 0.03 percent versus the greenback at 109.22 per dollar.

Gold prices have maintained a firm tone with a push to 2-month highs on Thursday as underlying demand for defensive assets remained an important feature.

United States crude rose 0.41 percent to $48.79 per barrel and Brent was last at $52.01, up 0.21 percent.

Gold futures for December delivery on the Comex division of the New York Mercantile Exchange rose $3.40, or 0.26%, to $1,293.37 a troy ounce.

Oil prices rose nearly half a percent in today's trading following a bigger-than-expected drop in USA crude inventories.

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