North Korea Has Markets Nervous But Not Panicked

North Korea Has Markets Nervous But Not Panicked

North Korea Has Markets Nervous But Not Panicked

Market analysts expect that the pullback in stocks due to the increasingly aggressive tone in exchanges between Washington and Pyongyang will continue, although investors hope that the selling will not escalate to a correction - a decline of 10 percent or more.

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

U.S. stocks ended lower on Thursday, and Asian markets fell sharply, with Hong Kong's Hang Seng index dropping 2%.

The Dow and S&P 500 inched higher on the day but they both posted their largest weekly percentage drops since late March.

"There's not a great incentive to buy big".

The escalation of the rhetoric between the U.S. and North Korea is keeping market participants on their toes and with no fresh economic reports the price action is dictated by the headlines.

The suspected range of North Korea's missiles based on their ICBM tests. Chris Jones  IFLScience
The suspected range of North Korea's missiles based on their ICBM tests. Chris Jones IFLScience

The Dow Jones Industrial Average fell 36.64 points or 0.17 per cent to end at 22,048.7, the S&P 500 lost 0.9 point or 0.04 per cent to 2,474.02 and the Nasdaq Composite dropped 18.13 points or 0.28 per cent to 6,352.33.

The pan-European FTSEurofirst 300 index lost 1.06 percent and MSCI's gauge of stocks across the globe shed 0.17 percent.

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 euro rose to $1.1824 from $1.1774.

"Pretty remarkable, perhaps even extraordinary, considering", said Tim Ash, strategist at fund manager BlueBay.

MARKETS OVERSEAS: Major indexes in Europe were mixed.

The North Korea situation isn't the only thing weighing on stocks.

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But the yen added to an already-strong weekly rally of close to 1.5 percent, hitting its highest in nearly four months versus the dollar at 108.73 yen. In a note to investors, Paul Christopher, head global market strategist, and Tracie McMillion, head of global asset allocation, suggest, "the threat of a nuclear weapon is certainly more serious than previous threats, but that threat also may increase the probability of a diplomatic solution".

The Dow Jones industrial average closed up 14 points, a gain of 0.07 percent, the Nasdaq composite rose almost 40 points or 0.64 percent and the S&P 500 gained 3 points or 0.13 percent.

US government bonds strengthened Friday as soft inflation data led investors to further scale back expectations for interest-rate increases from the Federal Reserve.

"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.

The Russell 2000 index of smaller-company stocks picked up 1 point, or 0.1 percent, to 1,373.

Sterling was last trading at US$1.3007, up 0.25 per cent on the day.

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But losses soon resumed, with Tokyo edging down as the Nikkei again came under pressure from the strength of the safe-haven yen, which hit eight-week highs Wednesday against the dollar. Yields fall when bond prices rise.

The latest USA economic data cemented expectations that inflation will remain subdued amid a robust labour market.

In the latest economic data, the consumer-price index (http://www.marketwatch.com/story/us-consumer-inflation-remains-soft-in-july-cpi-shows-2017-08-11) rose a seasonally adjusted 0.1% in July, its fifth straight month of softness, raising more questions about whether inflation will eventually rise to hit the Federal Reserve's 2% annual rate target. The 30-year bond was last up 4/32 in price to yield 2.7871 per cent, from 2.794 per cent late on Thursday.

And in a textbook-type cross-asset move toward safety in times of trouble, the Japanese yen hit an eight-week high against the US dollar while spot gold also reached a two-month high. Brent crude, used to price global oils, was down 35 cents to $51.55 a barrel in London.

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

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