European markets end lower amid geopolitical tensions

Gladys Abbott
August 13, 2017

Technology companies led US stocks slightly higher in afternoon trading Friday, recouping some of the losses from the day before. The S&P has lost more than 1 percent on only three days this year.

"It's fantastic when you consider the headlines just how calm the equity markets are, how they've taken things in their stride", said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.

Five of the 11 major S&P sectors were higher, with the technology's 0.80 percent rise leading the advancers. The index had its biggest drop since mid-May a day earlier.

At 9:34 a.m. ET (1334 GMT), the Dow Jones Industrial Average was up 54.06 points, or 0.25%, at 21 898.07, the S&P 500 was up 5.23 points, or 0.21%, at 2 443.44. The Nasdaq added 39.68 points, or 0.6 percent, to 6,256.56.

The recovery fit a recent pattern of investors using dips to put more money in stocks. The stock is up 54% so far this year. "You're less than 2 per cent off the high for the S&P heading into a weekend where uncertainty with North Korea still lingers".

But U.S. stocks regained some lost ground, despite Trump's comments Friday that U.S. weapons are "locked and loaded", ready to respond if North Korea acts "unwisely". Earlier in the week, Trump said the USA would unleash "fire and fury" on North Korea if it continued to threaten the U.S.

The back-and-forth came on the heels of reports the USA intelligence community has determined North Korea has successfully produced a miniaturized nuclear warhead that can fit inside its missiles.

There were fewer signs of anxiousness in the markets Friday.

"Risk aversion is once again the name of the game... as geopolitical tensions mount and investors head for cover in the traditional safe havens", said Oanda analyst Craig Erlam. It's still the highest it's been since May.

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US government bonds strengthened Friday as soft inflation data led investors to further scale back expectations for interest-rate increases from the Federal Reserve.

A small rise in a measure of U.S. consumer prices pointed to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year, which would be favourable to equity investors. But some economists say the Fed may stand pat for the rest of 2017 unless inflation accelerates in coming months.

"There are four more (inflation) prints between now and the December FOMC meeting and we expect the Fed to remain data-dependent, if a touch more cautious", said TD Securities in a research note.

Technology companies, which suffered the brunt of the selling a day earlier, were back in the lead Friday. Vertex Pharmaceuticals picked up $3.19, or 2.1 percent, to $151.73. Seagate shares rose 69 cents to $32.24.

SLIDING: Traders sold-off financial stocks amid speculation that the Fed will decide to hold off on raising interest rates next month. AES Corp. shed 26 cents, or 2.3 percent, to $11.12. The company also said sales at its established stores declined for the fourth-straight quarter. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped 4.2 basis points to 2.241 percent.

The weakness among oil service stocks came despite an increase by the price of crude oil, as crude for September delivery climbed $0.39 to $49.56 a barrel. Natural gas was also flat at $2.98 per 1,000 cubic feet. Silver gained 1 cent to $17.07 an ounce.

The Japanese yen last strengthened 0.03 per cent versus the greenback at 109.22 per dollar. The euro rose to $1.1824 from $1.1774. The three major indexes closed out the week in positive territory following yesterday's lows. Germany's DAX was up 0.1 percent, while France's CAC 40 fell 1.1 percent. The index is bouncing off its lowest closing level in six months.

South Korea's KOSPI fell 1.7 percent on Friday to its lowest since May 24, but its losses for the week were a relatively modest 3.2 percent.

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