Global stocks, dollar extend slide as US, North Korea tensions intensify

Marco Green
August 13, 2017

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. USA crude was down 0.9 per cent at $48.16 per barrel, on track for a weekly loss of 2.9 per cent.

The UK blue-chip index closed 113 points, or 1.5%, lower at 7,385, steadily losing ground as the trading session wore on.

The US Consumer Price Index (CPI) edged up 0.1% last month after staying flat in June and falling by 0.1% in May.

"If the data continues to come in on the softer side, the market might start to price the Fed staying on hold this year", said Sireen Harajli, FX strategist at Mizuho in NY. Secretary of state Rex Tillerson said yesterday North Korea posed no "immediate threat" and that "Americans should sleep well at night, have no concerns about this particular rhetoric of the last few days". Additionally, China weighed in on the standoff, saying in an editorial in state-run Global Times that Beijing will intervene if the USA strikes first against North Korea.

Materials, a sector that includes gold producers and other resource-based companies, was the lone gainer among the index's 10 main sectors, rising 0.7 per cent. Spot gold reached a two-month high.

Overseas markets were also lower Wednesday.

U.S. dairy group Dean Foods dropped nearly 21 percent as its quarterly earnings fell, and the stock received a downgrade from JPMorgan.

Manulife Financial Corp was down 1.1 percent to C$25.64. For the week, the index lost over 3% to register its biggest weekly loss since February of 2016.

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. He also said the nuclear-armed nation should be "very, very nervous" if it even thinks about attacking the United States or its allies.

North Korea on Thursday detailed plans for a missile strike near the U.S. Pacific territory of Guam. The index closed on record for the ninth trading session on Monday. Were the situation to escalate, much more than the stock markets would be at risk.

The Dow Jones Industrial Average rose 44.33 points, or 0.2 percent, to 21,888.34, the S&P 500 gained 6.01 points, or 0.25 percent, to 2,444.22 and the Nasdaq Composite added 32.10 points, or 0.52 percent, to 6,248.97.

In bond markets, the yield in U.S. Treasuries fell, also pressured by the lowered expectations for a Fed move.

The stock has had an impressive rally in 2017 so far, up 30% in the year to date. The stand-off between the two countries has encouraged dealers to dump stocks and seek safe haven investments like gold. In Australia, the S&P/ASX 200 advanced 0.41%, with the index driven by broad-based gains, with only the energy and utilities sub-indexes registering slight losses.

The department store chain reported earnings of $110 million, or 65 cents a share.

Selling was broad. Declining issues outnumbered advancing ones on the NYSE 6-to-1; on Nasdaq, a 3.60-to-1 ratio favoured decliners.

Other reports by Click Lancashire

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