Investors seek safety as N. Korea tension escalates; stocks off, gold up

Gladys Abbott
August 12, 2017

U.S. Secretary of State Rex Tillerson tried to ease concerns that the U.S. was heading toward a military confrontation with North Korea after President Donald Trump rattled global markets with his warning that he could unleash "fire and fury" against Kim Jong Un's regime.

Many markets had already been at record or multi-year highs after an extended rally, leaving them vulnerable to a sell-off.

"It's surprising that given Japan's proximity to North Korea the yen is seeing any benefit from risk aversion", said Lennon Sweeting, chief market strategist for XE.com, in Toronto.

As of 12:20 BST, the FTSE 100 index had lost 83 points to stand 1.12 percent lower at 7,306.94, staying on track to post a near three-percent loss for the week.

"We're not very oversold yet so the market still has more downside left to it".

Financial markets have tended to quickly shake off North Korea's periodic sabre-rattling in the past, dismissing it as bluster, but tensions have lingered this year amid signs that it is making progress in its ballistic missile programme and on Trump's growing frustration with Pyongyang. "Every August we have some reason to run up the alarm", Kenny said.

US stocks felt significant early drag, with the S&P 500 down 0.5% at the open.

More news: Pakistan Cricket Board chairman calls for patience over security situation

On that note, the Global Times also pointed out that: "if the US and South Korea carry out strikes and try to overthrow the North Korean regime and change the political pattern on the peninsula, China will prevent them from doing so". "Hard to assess political risk is now intruding on this scenario".

News that USA producer prices unexpectedly fell in July earlier helped send the dollar lower.

The dollar index, which gauges the greenback against the currencies of six major United States trading partners, was last 0.2% down on the day during afternoon European trading hours - it stood at 93.20.

The yen is often sought in times of geopolitical tension, partly because Japan has a big current account surplus, and it being the world's biggest creditor nation, there is an assumption Japanese investors may repatriate their foreign holdings in times of heightened global uncertainty.

The Japanese yen strengthened 0.35 per cent versus the greenback at 109.94 per dollar.

"If we were threatened, the USA would take action and there'd be a Treasury rally", said Battle. An ounce of the precious metal was quoted at USD1,285.10 early Friday, compared to USD1,285.32 at the London equities close on Thursday, which represented a two-month high.

USA crude oil crude futures edged up 5 cents to $48.64 per barrel. The September copper contract was down two cents to US$2.91 a pound. Rival Advanced Micro Devices was also down 2.6 percent. Anglo American (LON:AAL) is now leading other blue-chip miners lower, having shed 4.22 percent to 1,223.50p. It is poised to end the week down 1 percent.

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