S. Korean stocks down 1.1% on heightened tensions over N

Xavier Trudeau
Août 13, 2017

"The slight bias to the upside (in stocks) is a result of the CPI number".

"Geopolitics splashed cold water on the markets", said J.J. Kinahan, chief strategist at TD Ameritrade.

"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.

Mattis said North Korea must stop isolating itself and "stand down" in its pursuit of nuclear weapons, and Pyongyang "should cease any consideration of actions that would lead to the end of its regime and the destruction of its people".

Early in the day, North Korea revealed a detailed plan to launch a salvo of ballistic missiles toward the U.S. Pacific territory of Guam, a major military hub and home to U.S. bombers.

Markets had been bracing for a correction after weeks of record highs. "You're less than 2 percent off the high for the S&P heading into a weekend where uncertainty with North Korea still lingers".

The benchmark Korea Composite Stock Price Index lost 39.76 points, or 1.69 percent, to 2,319.71.

Dow e-minis were down 24 points, or 0.11 percent, with 22,166 contracts changing hands. The S&P hasn't moved more than 0.5 percent in one day since July and has fallen more than 1 percent only twice this year. Natural gas jumped 10 cents, or 3.5 percent, to $2.99 per 1,000 cubic feet.

MARKETS OVERSEAS: Major indexes in Europe were headed lower.

However, Federal Reserve Bank of New York President William Dudley suggested on Thursday that the central bank was on track to raise interest rates once more as he expects sluggish inflation to rise over the next several months.

In the United Kingdom, the FTSE 100 closed down 0.59%, or 44.67 points, at 7498, broadly in line with negative trends in European markets.

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.

There were falls of almost 2% on South Korea's Kospi and Hong Kong's Hang Seng, with markets in mainland China and Australia also down - taking their cues from sharp losses on Wall Street earlier. They suggest the USA and China, a North Korean ally, could work together to de-escalate the situation.

"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. Germany's DAX fared better, trading only 0.2 percent lower at 11,989.

S&P 500 e-minis were down 4.5 points, or 0.18 percent, with 209,543 contracts traded. Small-company stocks fell more than the rest of the market. Silver also rose, gaining 47 cents, or 2.8 percent, to $16.86 an ounce.

Benchmark U.S. crude rose 23 cents to settle at $48.82 a barrel on the on the New York Mercantile Exchange.

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