European markets end lower amid geopolitical tensions

Marco Green
August 13, 2017

Global stock markets ended their worst week in months amid rising tensions between the US and North Korea, though USA stock indexes steadied on Friday to close up slightly.

President Trump took aim at North Korea again on Thursday, saying that his earlier threat to unleash "fire and fury" may not have gone far enough.

Mr. Trump's remarks on Tuesday that North Korea would face "fire and fury like the world has never seen" pushed Wall Street lower on Tuesday and drove up the VIX "fear gauge" of expected volatility on the S&P 500 higher.

"If the US 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.

The greenback also came under pressure after New York Federal Reserve President William Dudley cautioned it would "take some time" for USA inflation to reach the bank's two percent target, the latest warning price pressures remain muted. The Russell 2000 index of smaller-company stocks gave up 10 points, or 0.8 percent, to 1,399.

On Thursday, New York Fed President William Dudley said he expects sluggish USA inflation to rise over the next several months while the hot labor market gets even hotter.

Spot gold added 0.7 percent to $1,286.00 an ounce.

Losses in health care and consumer-focused companies pulled United States stocks broadly lower Tuesday, snapping a 10-day winning streak for the Dow Jones industrial average. Investors welcomed new data showing USA inflation at the consumer level inched higher last month, suggesting that the Federal Reserve may be less likely to raise interest rates next month. Major indexes in Asia closed lower.

China's Shanghai Composite Index plunged 51.94 points or 1.6% to 3,209.80, as investors continued to book profits in cyclical sectors.

"The market had been complacent for a while regarding headlines from North Korea". While the French CAC 40 Index fell by 0.6%, the German DAX Index slumped by 1.1% and the UK's FTSE 100 Index plunged by 1.4%. On the week, the Dow Jones lost 0.9 %; the S&P 500 has dropped 1.4 per cent, its biggest weekly decline in more than four months.

Commodity-related stocks are among the worst performers against the backdrop of heightened political uncertainty after Trump further ratcheted up the rhetoric. Gold rose 1.2 per cent, while the Swiss franc was on track to post its biggest single day rise in about two-and-a-half years. Disappointing company earnings also helped pull the market lower, with consumer-focused companies and technology stocks among the biggest decliners. The euro fell to $1.1728 from $1.1757. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.9 basis points to 2.212%.

The dollar was down 0.77 percent against the yen at 109.21 yen. The u.s. central bank, one of whose tasks is to contain the price rise, does not therefore appear to be obliged to accelerate the pace of the slow tightening of monetary that it has committed.

Other reports by Click Lancashire

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