Stock markets lower, gold price continues to rise amid political tensions

Xavier Trudeau
Août 13, 2017

North Korea carried out its second intercontinental missile test on July 28, later claiming that it now had the capability to reach all of the United States mainland. "The unpredictable nature of North Korea means it is hard to gauge exactly how likely an attack is. Hopefully Kim Jong Un will find another path!"

In New York, the Dow Jones industrial average was down 110.82 points to 21,937.88.

President Donald Trump warning the North would be met "with fire and fury".

'If anything, maybe that statement wasn't tough enough, ' he told reporters yesterday, saying that North Korea 'better get their act together or they're going to be in trouble like few nations ever have been in trouble in this world'. Economists had expected another 0.1% uptick. This is because bond prices and yields have an inverted relationship.

Several Asian corporates are expected to report earnings during the day.

Futures markets were also pointing to a lower start for Wall Street, where missile makers have been the only significant gainers in recent days. The NYSE Arca Biotechnology Index plunged by 3.4% to its lowest closing level in well over a month. The index had its biggest drop since mid-May a day earlier.

Investors also drew some encouragement from new government data showing US inflation at the consumer level inched higher last month.

Meanwhile, gold stocks bucked the downtrend, driving the NYSE Arca Gold Bugs Index up by 1.3%. However, strength in the Health Care and Materials sectors limited the losses. Brent crude, used to price worldwide oils, gave up 29 cents to $51.85 in London.

On the currency markets, the pound was down to a three-week low against the United States dollar but mainly due to earlier disappointing output and trade data.

Analysts warned the softening dollar could test June's low of 108.82 yen and even the 2017 trough of 108.13 yen. Japan was closed on a public holiday.

In currencies, the yen rose 0.8 percent versus the greenback at 109.2 per dollar JPY=, the strongest level for the Japanese currency since mid June.

The dollar came under immediate pressure and gold moved to fresh 2-month highs just above $1,290 per ounce.

Tokyo's Nikkei index had dropped 1.3% by the time European stock markets opened on Wednesday morning, with similar falls on the German and French bourses.

In Hong Kong, shares ended lower, but developers provided support.

In Australia, the S&P/ASX 200 added 0.21%.

Major bank Mitsubishi UFJ fell 1.06 percent at 703 yen.

Fiscal spending grew 5.4% from a year ago in July.

Until this week, the equity market had managed to shake off negative news, including previous saber-rattling over North Korea and failures in Washington to pass high-profile bills, such as repealing and replacing Obamacare. Britain's FTSE 100 sank 1.1 percent to 7,414.

The pan-European STOXX 600 was down 0.7% at closing, France's CAC 40 fell 1.4% after a vehicle hit a group of soldiers in Paris in what is thought to have been a deliberate act, and a fall in bond yields saw Germany's DAX down 1.1%.

Commodity-related stocks are among the worst performers against the backdrop of heightened political uncertainty after Trump further ratcheted up the rhetoric.

Danish biotech company Novozymes has tumbled after cutting its growth outlook.

A report released by the Labor Department showed a modest uptick in consumer prices in the USA in the month of July.

Investors retreated from several of this year's winners on Thursday, including shares of large US technology companies and biotechnology firms. Despite the losses, Noble shares rose 17.14 percent.

Kohl's, another department store chain, slumped 8.9 percent after reporting that second-quarter sales dipped 0.9 percent compared with the year-ago period. Energy stocks fell along with crude prices as investors kept an eye on the latest company earnings and geopolitical news.

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