Stocks, dollar extend slide as US, North Korea tensions intensify

Pauline Gross
August 11, 2017

Wall Street declined on Tuesday after a late afternoon selling spree in response to President Donald Trump's statement saying North Korea "will be met with fire and fury" if it threatens the US.

Nasdaq 100 e-minis were down 39.75 points, or 0.67 percent, on volume of 53,600 contracts.

The Korean won also continued to skid, sliding 0.4 percent to 1,146.2, below its 200-day moving average.

It was reported Tuesday the USA intelligence community believes North Korea has developed mini nuclear warheads that can be fitted into ICBMs.

Trump's second warning, however, has shaken markets that have been largely resilient this year, swatting away a slew of risks. The S&P 500 lost 5.99 points, or 0.24 per cent, to close at 2,474.92 and the Nasdaq Composite dropped 13.31 points, or 0.21 per cent, to 6,370.46. These have ranged from an investigation into Russia's possible interference in the 2016 USA presidential election, to concerns about China's risky debt levels, to stubbornly low inflation in the U.S. The index hit a life-high of 415.49 earlier.

The CBOE Volatility Index, the most widely followed barometer of expected near-term USA stock market volatility, rose the most in about 12 weeks.

More than 430 stocks from all US exchanges hit their lowest levels in 52 weeks or more on Thursday, the most for any session since mid-November right after Trump was elected.

The Dow slid as declines in Apple and Goldman Sachs, down 2.3% and 1.7% respectively, outweighed gains in McDonald's and Coca-Cola, up 1.4% and 0.5% respectively.

Neil Mellor, a currency strategist with Bank of New York Mellon in London, said the pound was "drifting towards the lows from last month against the dollar".

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Stocks lower, safe-haven assets higher amid US-North Korea tensions
Many Asian currencies struggled, with the Korean won heading for its sharpest fall in almost eight weeks. The price of gold rose 1.2 percent and the Swiss franc had its best day in almost three years.

The VIX, a measure of how much volatility investors expect in stocks, jumped 10.4 percent.

Markets were also lower in Europe and Asia. "For now, the North Korea situation bears watching as there's lots of tough talk, but we'll see if it escalates", said Kinahan. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.5 basis points at 2.226 percent.

Investors again sought safe-haven assets such as gold and the Swiss franc, helping gold hit a more two-month high.

Stocks going ex-dividend included BT, Royal Dutch Shell (LSE: 0LN9.L - news), BP, Lloyds, and pharma companies GSK and AstraZeneca (NYSE: AZN - news), taking around 41 points off the index.

Additionally, Asian stocks settled and U.S. Treasury bond prices fell slightly in the pre-market trade.

Although gold traders are likely to remain focused on the U.S.

They were down 0.7 percent at $48.24 per barrel, on track for a weekly loss of 2.7 percent.

The Labor Department said its producer price index for final demand edged down by 0.1 percent in July after inching up by 0.1 percent in June. The fact that ended with a 1%-plus drop, however, might be good news.

Other reports by GizPress

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