Published: Sat, August 12, 2017
Hi-Tech | By Ellis Neal

Stocks, dollar extend slide as US, North Korea tensions intensify

Stocks, dollar extend slide as US, North Korea tensions intensify

On Wall Street overnight, the Nasdaq retreated 2.1 percent, while the S&P 500 was down 1.4 percent, and the Dow Jones Industrial Average pulled back 0.9 percent.

Shares of Snapchat parent Snap Inc.(SNAP) slid 14% a day after the company's earnings missed forecasts (http://www.marketwatch.com/story/snap-ceos-promise-cant-overcome-declining-ad-rates-stock-heads-toward-new-lows-after-earnings-2017-08-10), and the social-messaging company disclosed that average ad prices fell in the second quarter.

And with that, the S&P 500's steak of 58 days without a 1% move in either direction came to an end.

"The cooler CPI figures this morning follow similarly lower than expected wholesale price data yesterday and together, have highlighted the extremely benign inflation backdrop that has reduced expectations for Fed lending rate hikes in the months ahead", said Omer Esiner, an analyst at Commonwealth Foreign Exchange.

Excluding food and energy prices, core consumer prices still crept up by 0.1% in July, matching the increases seen in the three previous months. Core PPI was also down 0.1%, missing the 0.2% estimate.

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 favourable to equity investors. Indeed, US equities sold off at the open and added to those losses this afternoon following President Trump's latest warning to North Korea. "If the answer is yes, then you better get defensive".

Overall risk conditions remained fragile, although there was no further aggressive rhetoric from US President Trump. "Hopefully Kim Jong Un will find another path!"

"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. The stock was the biggest decliner in the S&P 500, losing $155 to $1,893.99.

The top flight index was down 1.44% to 7,389.94, alongside a 27.01% spike in the FTSE 100 volatility index to 13.60, with the more domestically focused FTSE 250 down 0.88% to 19,699.42. Autodesk (ADSK) and Red Hat (RHT) posted notable gains.

USA stock futures were pointing to a weaker open on Friday.

South Korea's KOSPI fell 1.7 per cent on Friday to its lowest since May 24, but its losses for the week were a relatively modest 3.2 per cent. Japanese markets were closed for a holiday.

The Korean won continued to fall versus the dollar, down 0.13 per cent to 1,143.5 on Friday for a 1.6 per cent decline on the week. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 2.3 basis points to 2.189%. "The North Korea situation appears to be the culprit".

But he also cautioned disappointing inflation data may delay interest rate increases.

Pan American Silver Corp, which reported second-quarter results late Wednesday, rallied 10.7 percent to C$22.47.

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