Global stocks fall on rising unease over North Korea

Gladys Abbott
August 13, 2017

Traders took heart in a measure of US consumer prices that increased only slightly in July, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year. The stock fell $166 to $1,882.94.

"The data confirms the Fed will have a wait-and-see attitude", said King Lip, chief investment officer at Baker Avenue Asset Management in San Francisco. Netflix was down 2.35 percent.

USA equities steepened their losses late in the session after President Donald Trump said his earlier warnings to North Korea may not have been tough enough.

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.

On Wednesday, North Korea's military said it is considering missile strikes near the United States territory of Guam, warning that it is ready to stage an all-out war if Washington launches a preventive war against it.

Baker Avenue's Lip said the US market was higher due to "bargain hunters", but "there's more room for the market to come down".

Politics lifted United States defense stocks.

The Standard & Poor's 500 index dropped 35.81 points, or 1.5 percent, to 2,438.21. Lockheed Martin (LMT.N), Raytheon (RTN.N), General Dynamics (GD.N) and Northrop Grumman (NOC.N) were all up, with the Dow Jones U.S. defense index.DJUSDN up 1.48 percent at 409.58.

Selling was broad. Declining issues outnumbered advancing ones on the NYSE 6-to-1; on Nasdaq, a 3.60-to-1 ratio favored decliners. The Russell 2000 index of smaller-company stocks gave up 9 points, or 0.7 percent, to 1,400.

Most large-cap stocks were mixed across the board. The index had its biggest drop since mid-May a day earlier.

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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 will repatriate funds should a crisis materialize. Netflix also fell, giving up $3.37, or 1.9 percent, to $174.99.

US DATA: The other potential driver in markets will be upcoming USA economic data, including monthly inflation figures, which could go a long way to determining expectations for the pace at which the Federal Reserve raises interest rates.

"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.

Gold added $10.80, or 0.8 percent, to settle at $1,290.10 an ounce.

The S&P 500 has closed within 0.30% of its opening level in 16 of the last 17 days of trading.

FINANCIALS FALLING: Several financial sector companies also helped pull down the market.

"This inflation data for the month was not good".

Bond prices rose. The yield on the 10-year Treasury fell to 2.20 percent. Oil prices were headed higher. Hong Kong's Hang Seng was off 0.3 percent.

Inflation has risen 1.7 percent over the past 12 months, suggesting that inflation pressures remain well under control.

Benchmark U.S. crude rose 23 cents to settle at $48.82 a barrel on the on the New York Mercantile Exchange. Australia's S&P/ASX 200 edged down almost 0.1 percent.

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