Tuesday, 22 August, 2017

North Korea has markets nervous but not panicked

Investors looked for cover after strong words by President Trump causing Japan’s Nikkei to drop Investors looked for cover after strong words by President Trump causing Japan’s Nikkei to drop Eugene Hoshiko AP
Preston Stone | 14 August, 2017, 00:04

U.S. President Donald Trump's warning North Korea faced "fire and fury" and Pyongyang's threat of possible retaliation drove investors out of stocks and into the yen, Swiss franc, gold and government debt. "Risk aversion is still very much a concern for markets", said Shaun Osborne, chief currency strategist at Scotiabank in Toronto. It is heading for a 2.5% drop for the week.

"What has changed this time is that the scary threats and war of words between the US 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.

Gold, another classic safe haven asset, was trading at around $1,285 per ounce, up more than two percent this week and near a nine-week high.

The Standard & Poor's 500 index fell 35 points, or 1.4 percent, to 2,438, its biggest drop since mid-May. United States gold futures for December delivery rose 0.5% to $1,285 per ounce.

The market also awaited U.S. consumer inflation data on Friday that would offer more clues about the pace of the U.S. Federal Reserve's monetary tightening.

Emerging market stocks lost 1.27 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.47 per cent lower.

The yen tends to benefit during times of geopolitical or financial stress as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors there will repatriate funds should a crisis materialize.

The CBOE Volatility Index, the most widely followed barometer of expected near-term stock market volatility, ended at a session low of 11.11 after rising as high as 12.63.

Yuvraj dropped, Ashwin, Shami rested for SL ODIs and T20I
Axar Patel, Kuldeep Yadav and Yuzvendra Chahal are captain Virat Kohli's options among slow bowlers. The Mumbai batsman has been named as the vice-captain of the squad .

In Australia, the S&P/ASX 200 added 0.21%. MetLife fell 75 cents, or 1.6 percent, to $47.56, while Charles Schwab slid 69 cents, or 1.6 percent, to $41.33. The dollar index, which measures its strength against a basket of currencies, was roughly flat at 93.420.

The dollar was further weighed Friday by the soft USA inflation data.

The franc reversed a two-week losing streak and gained 1.1% to as firm as 0.9611 per dollar.

In a note sent to clients late on Thursday, the US bank predicted the single currency would rise to $1.25 in the first quarter of next year and reach parity with sterling for the first time.

Despite today's jump, gold still sits well below its 52-week high of over $1,350 per ounce, which it reached last summer.

USA producer prices unexpectedly recorded their biggest drop in almost a year, and the number of Americans filing for unemployment benefits unexpectedly rose last week.

Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in USA crude inventories, leaving prices volatile. Brent crude, used to price global oils, gave up 22 cents to $51.92 in London.

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