Stocks plunge over North Korea tensions

Ivan Schwartz
Августа 12, 2017

According to reports, North Korea said it was completing plans to fire four intermediate-range missiles over Japan to land near the U.S. Pacific island territory of Guam. Ten-year USA yields dropped 4.3 basis points to 2.24 percent and German equivalents fell 3 bps to 0.43 percent, a six-week low. It is heading for a 2.5% drop for the week.

Economic data showed U.S. producer prices unexpectedly fell in July, recording their biggest drop in almost a year, while separate figures showed the number of Americans filing for unemployment benefits unexpectedly rose last week.

He said the crisis provided a "perfect trigger" for a correction at a time when many markets - including the FTSE 100 - were at or around record highs, leaving them vulnerable to a sell-off if investors think it is time to take profits.

"Too many past administrations have kicked the can down the road and we've finally come to the end of the road where North Korea has nuclear weapons and the means to deliver them", he said.

"While the US President insists on ramping up the war of words, there is a decreasing chance of any diplomatic solution", Mr Carnell said.

Traders reacted with dismay to his fresh warning Thursday that his earlier threat to unleash "fire and fury" on the reclusive nuclear-armed state may not have been "tough enough".

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"The latest threats over North Korea have finally escalated to the point where market has been obliged to react", Ric Spooner, chief market analyst at CMC Markets, wrote in a note.

On the economic front, data is expected to show that US consumer prices likely rose in July after being unchanged the prior month. Last month, Pyongyang test-fired two intercontinental ballistic missiles, prompting new United Nations sanctions against the country. The pair finished yesterday's trading at 0.9072.

The Swiss franc, the other traditional safety-play among currencies, has benefited too.

The US dollar slipped to an eight-week low against the Japanese yen on Thursday as continuing tensions between the United States and North Korea led investors to look for assets viewed as less risky.

"A combination of softer euro zone economic data, solid USA reports and market positioning all resulted in a markedly heavier tone for the single currency", Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, said in a note.

He voiced optimism, however, that offshore fund inflows to the Thai stock market would be seen in the final quarter, fuelled by attractive valuations and improving earnings in several sectors, including advertising, tourism and consumption.

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