Asia Stocks Snap Back Into the Red on Simmering North Korea Tensions

Xavier Trudeau
Août 12, 2017

Gold was up $3 at $1293 an ounce, adding to 2-month highs. In Japan, the Nikkei closed in the red ahead of Friday's national holiday, dropping 0.1%.

In New Zealand, the Kiwi Dollar edged higher after the central bank there left rates unchanged at the current 1.75%.

The Australian and New Zealand dollars also came under pressure on Wednesday as the flare-up in tensions over North Korea sparked a shift to currencies considered safer harbours, most notably the Japanese yen.

The Nasdaq Composite was down 16.88 points, or 0.26 percent, at 6,353.58.

President Donald Trump said on Tuesday that US threats from Pyongyang would be met with "fire and fury", which prompted North Korea to say it was considering plans for a missile strike on the USA pacific territory of Guam. Pyongyang said it was examining plans for attacking Guam, a USA territory in the Pacific with a military base. Elsewhere, Germany's DAX has dropped 0.7% and London's FTSE 100 is off 1.1%, putting it in on pace for its biggest single-day percentage loss since April.

The so-called fear gauge - the CBOE Volatility Index (VIX), the most widely followed barometer of expected USA stock market volatility, hit its highest since November 8, when Mr Trump was elected president.

After threatening to visit "fire and fury" on North Korea, President Donald Trump said that maybe the warning "wasn't tough enough".

The dollar weakened after news that US producer prices unexpectedly fell in July, recording their biggest drop in almost a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.

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. "Because things will happen to them like they never thought possible".

"Clearly the market's taken a bit of a black eye", said Fahad Kamal, senior market strategist at Kleinwort Hambros, commenting on how the markets reversed course after a strong start this week. Still, he said, "the Washington, D.C., bedlam and North Korea's saber-rattling is muddying the broader landscape". 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 percent. On the Nasdaq, 1,846 issues fell and 953 advanced favoring decliners.

At 5.00 a.m. ET, U.S. crude hovered around $49.40 per barrel, while Brent stood around $52.37. On commodities markets, oil advanced with U.S. crude nearing $50 a barrel after figures from industry group the American Petroleum Institute showed a sharp decrease in stockpiles, a clear indication of the easing supply glut.

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