Wall Street rises on Fed bets but North Korea mutes gains

Ivan Schwartz
August 12, 2017

"European shares are trading once again lower. continuing their slide on the back of ever more increasing tensions between North Korea and the United States", added analyst Markus Huber at City of London Markets.

"As a portfolio manager, you say, 'Do I think we'll get a war out of this?'" said Torsten Slok, chief global economist at Deutsche Bank, referring to the back and forth between North Korea and President Donald Trump.

Globally, gold rose 0.23 percent to United States dollars 1,288.70 an ounce in NY in yesterday's trade. "The North Korea situation is still unstable and investors are controlling risk and taking profit after recent gains", said Sam Chi Yung, a Hong Kong-based strategist at South China Financial Holdings. Additionally, China weighed in on the standoff, saying in an editorial in state-run Global Times that Beijing will intervene if the US strikes first against North Korea.

Asian stocks slumped on Friday as tensions ramped up between the US and North Korea, sending investors fleeing to less risky assets such as gold, the yen and USA government bonds.

CURRENCIES: The euro slipped 0.1 percent to $1.1176 while the dollar was steady at 109.20 yen.

Yes, the VIX volatility index remains historically low at just 15.4.

For the week the S&P fell 1.4 percent and the Dow lost 1.1 percent - their largest weekly drops since the week ending March 24 - and the Nasdaq was off 1.5 percent.

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Stocks plunge over North Korea tensions
On the economic front, data is expected to show that US consumer prices likely rose in July after being unchanged the prior month. 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.

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

Shares of Snapchat-parent Snap Inc.(SNAP) slid 12% a day after its earnings missed forecasts (http://www.marketwatch.com/story/snap-ceos-promise-cant-overcome-declining-ad-rates-stock-heads-toward-new-lows-after-earnings-2017-08-10), and the social-messaging company disclosed that average ad prices fell in the second quarter.

US Treasury long-dated yields dropped to six-week lows, pressured by US-North Korea tensions and the weak data that further reduced expectations of an interest rate hike in December.

Markets in Italy, France and Germany also saw declines. The S&P 500 hasn't pulled back by 5% or more since June 2016. Following two days of meetings in Abu Dhabi, leading producers reiterated their commitment to output caps set earlier this year to support prices.

Gold prices XAU= rose 0.2 percent to $1,287.30 an ounce, after surging over 2 percent in the previous two sessions to a two-month high.

It makes sense that investors would start to cut their positions in some of their winners and look for other investments that might be better bets for a rockier period for the markets and global economy.

US crude rose 0.43 percent to $48.80 per barrel and Brent was last at $52.01, up 0.21 percent on the day.

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