Wall Street swings lower after Trump warns North Korea

Ivan Schwartz
August 13, 2017

Trump's remarks on Tuesday afternoon that North Korea would face "fire and fury like the world has never seen" weighed on Wall Street and drove up the VIX "fear gauge" .VIX , or the cost of protection against a drop in the S&P 500. Randgold Resources Ltd. and Barrick Gold Corp. were among the best performers, each gaining more than 1.4 percent.

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 in an unusually detailed threat.

Politics lifted USA defense stocks.

"Should the North Korea situation develop it may just prove to be the catalyst to push the institutional world to commit flows back to this asset class on a sustained basis", he said.

The Dow Jones Industrial Average rose 22 points, or 0.1%, to 21,867, while the S&P 500 was up 3 points to 2,440, a rise of 0.1%.

The Dow fell more than 200 points, a almost 1% drop, and its biggest dip in three months.

The index was down 1.44% or 108.12 points to close at 7389.94 on Thursday in its worst performance for four months.

Markets were also lower in Europe and Asia.

South Korea's won currency dropped 0.9 per cent against the dollar to its lowest close since July 13.

"Obviously we are looking at the increased tensions between the USA and North Korea", said Brad Bechtel, managing director FX at Jefferies in NY.

Gold prices were nudged away from recent highs as broader risk aversion receded somewhat.

Asian markets struggled again, with Japan's Nikkei feeling the pressure from the rise of the safe-haven yen, which hit an eight-week high.

South Korea's won dropped 0.9 percent against the USA dollar to its lowest close since July 13.

The Swiss franc reversed a two-week losing streak and gained 1.1 per cent to as firm as 0.9611 per dollar.

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The dollar index, which measures the U.S. currency against a basket of major peers, slipped 0.1 per cent as U.S. Treasury yields fell.

The U.S. dollar fell to 110.48 yen from 110.72 yen late Monday.

The yen is often sought in times of geopolitical tension, partly because Japan has a big current account surplus.

Sterling was last trading at $1.3006, up 0.02 percent on the day.

Blue Apron slumped as much as 19.1 percent to a record low after the meal-kit delivery service provider reported a bigger-than-expected loss in its first quarterly report as a public company.

Yields on core government debt fell.

The 30-year bond US30YT=RR last rose 5/32 in price to yield 2.8107 percent, from 2.818 percent late on Wednesday.

"If the USA and South Korea carry out strikes and try to overthrow the North Korean regime and change the political pattern of the Korean Peninsula, China will prevent them from doing so", the editorial's authors said.

OIL: Benchmark U.S. crude rose 23 cents to settle at $48.82 a barrel on the on the New York Mercantile Exchange.

US crude rose 1.08 percent to $49.70 per barrel and Brent was last at $52.78, up 1.23 percent on the day.

To that end, gold prices shot up to near $1,300 an ounce - their highest level in several months.

Spot gold XAU= added 0.7 percent to $1,285.70 an ounce.

On Thursday, New York Fed President William Dudley said he expects sluggish US inflation to rise over the next several months while the hot labor market gets even hotter. The Nasdaq composite fell 35 points, or 0.5 percent, to 6,336.

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