S&P suffers weekly loss amid ongoing US-N.Korea tensions

Pauline Gross
August 13, 2017

On Friday, an MSCI index of stocks across the globe posted its largest weekly drop since the week before Trump won the U.S. presidential election in November.

Now installed in the White House, Trump issued a new warning to Pyongyang on Thursday that his previous promise to unleash "fire and fury" may not have been strong enough.

European markets also slid in early trade after Wall Street indices suffered their biggest losses in almost three months Thursday, while the dollar struggled to recover from eight-week lows below 109 yen as investors fled to safe haven assets.

The Swiss franc and Japanese yen are often sought out in times of geopolitical tension or global financial stress, partly because both countries have big current account surpluses.

The Swiss franc, the other traditional safety-play among currencies, has benefited too. Its weekly gain of 2.6 per cent is the largest since June 2016. In bond markets, 10-year US Treasuries and Germany's ultra-safe government bonds were trading at their highest prices since June.

"For quite some time the market hasn't really reacted to things on the Korean Peninsula because we know from the past it is largely North Korean sabre-rattling, and it may yet be". This led to gold hitting a fresh nine-week high of $1,288.84 an ounce and pushed the dollar/yen pair down through the 109 level. The market was waiting f or US consumer inflation data on Friday that would offer more clues about future Fed decisions.

The pan-European FTSEurofirst 300 index (.FTEU3) lost 1.11 percent.

US President Donald Trump's brinkmanship in the escalating tensions with North Korea has taken a heavy toll on global markets, wiping $1 trillion off the value of shares worldwide.

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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 U.S. (244,000) and also a negative month-on-month PPI figure for the USA (-0.1%).

"This situation is beginning to develop into this generation's Cuban Missile crisis moment", ING's chief Asia economist Robert Carnell wrote in a note.

Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in USA crude inventories, leaving prices volatile.

The Korean won also continued to fall, down 0.45 percent to 1,147.2.

After touching a more than two-month high, spot gold last added 0.1 percent to $1,287.18 an ounce.

USA crude fell 0.41 percent to $48.39 per barrel and Brent was last at $51.68, down 0.42 percent on the day.

The dollar index fell 0.32 per cent, with the euro up 0.42 per cent to US$1.1819. Copper, the bellwether industrial metal, was set for its first weekly drop in five weeks. The Korea tensions though have seen both USA and European markets this week push back expectations of when the Fed and ECB might hike interest rates.

The dollar index slipped to a one-week low on Friday after the USA data.

Other reports by GizPress

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