Dow slips 100 points as tensions with N.Korea escalate

Gladys Abbott
August 12, 2017

Worries over a potential confrontation between the United States and North Korea weighed heavily on global stock markets on Wednesday but helped boost the price of assets, such as gold and the Swiss franc, that are considered safe havens in times of geopolitical peril.

The pan-European FTSEurofirst 300 index lost 1.01 per cent and MSCI's gauge of stocks across the globe shed 0.26 per cent for a weekly loss of 1.6 per cent, the largest since the week to November 4.

Copper traded at $2.912, down 0.25%, while natural gas tacked on 0.23% to $2.991.

The BATS UK 100 ended down 1.1% at 12,411.13, the BATS 250 closed down 0.8% at 17,756.36, and the BATS Small Companies ended 0.3% lower at 12,174.77.

In Europe, Britain's FTSE100 was down over one percent, Germany's DAX traded 0.5 percent lower, while the French CAC40 index was 0.62 percent in the red, as of 9:00am GMT.

Traders said hedge funds had cut leveraged bets against the franc, prompted in part by worries about increased US-North Korea tension.

"As a portfolio manager, you say, 'Do I think we'll get a war out of this?'" said Torsten Slok, chief global economist at Deutsche Bank, referring to the back and forth between North Korea and President Donald Trump.

"It's about time somebody stuck up for the people of this country and the people of other countries, so if anything, maybe that statement wasn't tough enough", Trump told reporters at his golf resort in Bedminster, New Jersey, where he is on vacation.

The jitters came as Pyongyang said it was considering plans to attack the US Pacific territory of Guam - while Donald Trump threatened to react with "fire and fury".

Oil also regained momentum as data pointed to declining USA inventories.

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"The market's dent only lasted for a week in April when tension rose between them after North Korea launched a missile".

Shane Oliver, head of investment strategy at AMP Capital in Sydney, said: "What has changed this time is that the scary threats and war of words between the USA and North Korea have intensified to the point that markets can't ignore it".

Equity markets had traded with a soft tone in Europe and there was a sharp increase in selling pressure in NY with the S&P 500 index declining by close to 1.0%.

Wall Street indices suffered their biggest losses in almost three months on Thursday, while the dollar struggled to recover from eight-week yen lows. Forecasters have warned Chinese economic growth is likely to slow this year, dampening demand for foreign goods, as controls imposed on bank lending to slow a rise in debt take hold.

The Labor Department said on Friday the Consumer Price Index (CPI) edged up 0.1% last month after being unchanged in June.

Excluding food and energy prices, core producer prices still dipped by 0.1% in July after creeping up by 0.1% in June.

"North Korea is being used as a reason to sell Japanese stocks, just as it was used yesterday in the U.S.", said Soichiro Monji from Daiwa SB Investments in Tokyo. However, during the Q&A session the Governor said that market pricing on interest rate moves looks reasonable, also he hinted that the next move could be an increase. "Perhaps we are done with the interest rate for this year", Aslam noted.

The index was down 1.44% or 108.12 points to close at 7389.94 on Thursday in its worst performance for four months.

The FTSE's fall was led by the volatile mining sector, with London-listed global commodity firms such as Antofagasta, Rio Tinto, BHP Billiton and Anglo American among the biggest losers.

Korea's Samsung Electronics fell 2.8% Friday. The Anglo-South African insurer and investment group said its interim profit and revenue grew strongly, but said it is taking a careful approach to dividends as it prepares to separate out its operations. Thursday was the most volatile trading day Wall St has seen in months.

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