North Korea standoff wipes $1trn off global stocks

Xavier Trudeau
Août 12, 2017

The Stoxx Europe 600 benchmark was down 1.1% (http://www.marketwatch.com/story/european-stocks-face-worst-week-in-9-months-on-us-north-korea-tensions-2017-08-11), while Hong Kong's Hang Seng led the Asian losses with a drop of 2%.

Rising costs for housing, medical care and food helped push the Consumer Price Index (CPI) up 0.1 percent in July, seasonally adjusted, after no change in June and a 0.1 decrease in May, the US Labor Department said.

The FTSE 100 slipped by50 points, to 7,394, after having fell by 44 points on Wednesday and 108 points yesterday. Australia's S&P/ASX 200 dropped 1.2 percent, while Japan was closed on a public holiday.

Toshiba has at last reported earnings for the year ended in March, fending off a delisting for now, but the Japanese conglomerate could still be kicked out of the stock market if it cannot conclude the sale of its memory unit by the end of March.

"It's been a bit of a roller coaster this week, with all the rhetoric between the U.S. and North Korea", said Jeff Kravetz, regional investment strategist at U.S. Bank Wealth Management.

Investor sentiment turned negative after North Korea said it was completing plans to fire four intermediate-range missiles over Japan to land near the US Pacific territory of Guam in an unusually detailed threat.

"It looks like it was used as a good excuse to adjust positions", he said, referring to the latest flare-up of tensions between the United States and North Korea. "Hopefully Kim Jong Un will find another path!"

Significant strength was also visible among software stocks, as reflected by the 1.2% gain posted by the Dow Jones Software Index.

The New York stock Exchange has chained three consecutive sessions of decline in response in a face-to-face meetings between the United States and North Korea. "Hard to assess political risk is now intruding on this scenario".

The greenback also came under pressure after New York Federal Reserve President William Dudley cautioned it would "take some time" for U.S. inflation to reach the bank's two percent target, the latest warning price pressures remain muted.

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

Gold got a boost from Dalio, the mercurial founder of the world's biggest hedge fund, Bridgewater Associates. Weakness in U.S. Treasury yields may also be supporting the yen. So do the bottom lines of many major companies. It is set for a weekly gain of 2.4 percent.

To that end, gold prices shot up to near $1,300 an ounce - their highest level in several months. They plunged 2 percent on Thursday on fears of slowing demand and lingering concerns over a global oversupply. It is now on track for its biggest weekly drop since the week before the November 8 US presidential election.

The RBNZ kept interest rates unchanged at a record low of 1.75 percent on Thursday.

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