Markets extend losses as Korea tensions escalate

Gladys Abbott
August 12, 2017

Nervous investors drove shares lower earlier in the week, after President Trump declared Tuesday that the US would react with "fire and fury" to further nuclear provocations from North Korea.

The so-called fear gauge - the CBOE Volatility Index (VIX), the most widely followed barometer of expected United States stock market volatility, hit its highest since November 8, when Mr Trump was elected president. The threat of nuclear war is real, and the war drums are beating louder and louder.

Economists had forecast the CPI rising 0.2% in July and climbing 1.8% year-on-year.

With Japan and South Korea also warning North Korea, investors are taking a step back to see what is happening before chipping in back, Bakhos said. The Nasdaq composite fell 35 points, or 0.5 percent, to 6,336.

"Traders would require nerves of steel to start buying into the stock market now, given standoff between the USA and North Korea", David Madden, market analyst at CMC Markets U.K., said in a note to clients.

The rhetoric between the USA and North Korea has continued to heat up, leading traders to look to safe havens such as gold and treasuries.

North Korea on Thursday outlined details for a missile strike near the U.S. territory of Guam, adding fuel to rising tensions with the United States.

With Japanese markets closed for a public holiday, Hong Kong led the downward charge in Asia-Pacific as the Hang Seng lost more than two percent.

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But Wall Street is wondering whether the sell-off is due to North Korea - or just a widely anticipated pullback?

Overall, earnings growth for MSCI Europe companies was tracking 24 percent, Thomson Reuters data showed, while MSCI Euro zone companies were seeing 16 percent earnings growth for the second quarter.

"We're not very oversold yet so the market still has more downside left to it", said Robert Pavlik, chief market strategist at Boston Private Wealth in NY. While the French CAC 40 Index fell by 0.6%, the German DAX Index slumped by 1.1% and the UK's FTSE 100 Index plunged by 1.4%.

In bond markets, the yield on US Treasuries fell, also pressured by the lowered expectations for a Fed move.

Benchmark US 10-year notes last rose 6/32 in price to yield 2.1905 per cent, from 2.211 per cent late on Thursday.

Disappointing economic data releases weighed on both sides of the Atlantic today with a negative goods trade balance for the United Kingdom (-0.1% versus expectations of 1.4%), higher unemployment claims from the USA (244,000) and also a negative month-on-month PPI figure for the U.S. (-0.1%). It is now on track for its biggest weekly drop since the week before the November 8 US presidential election.

USA crude rose 0.41 per cent to US$48.79 per barrel and Brent was last at US$52.01, up 0.21 per cent.

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