Tensions over North Korea weigh on stocks but boost gold

Marco Green
August 13, 2017

Consumer-focused companies and banks were among the biggest decliners.

The US Energy Information Administration raised its 2017 and 2018 US crude output estimates to 9.9 million and 9.33 million barrels a day respectively, Mr Weston said, but "on the other hand, we are hearing the UAE, Kazakhstan and Iraq will fully comply with the OPEC agreement" to cut oversupply.

The CBOE Volatility Index, better known as the VIX and the most widely-followed barometer of expected near-term stock market volatility, closed at 10.96, its highest in about a month.

Investors have been focusing on red-hot corporate profits, but talk of "fire and fury" turned attention to the risk of a nuclear conflict with North Korea. Major U.S. indices had posted record highs in recent weeks.

The North Korea situation isn't the only thing weighing on stocks. The Dow and S&P 500 suffered their worst week since March, and Wall Street's fear gauge spiked by the most in nearly two years.

London's FTSE 100 closed about 80 points, or more than 1%, lower on Friday, adding to a slump of more than 100 points the day before.

Bond prices were little changed.

Many markets have climbed to record or multi-year highs, leaving them vulnerable to a sell-off.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.68 percent, snapping a brief foray into positive territory early in the day and extended losses from Wednesday.

A statement from North Korea's military says "only absolute force" can work on someone as "bereft of reason" as Trump.

North Korea said it was considering plans to fire missiles at Guam, a US -held Pacific island, after President Donald Trump on Tuesday warned the nuclear-armed nation that it would face "fire and fury" if it threatened the United States.

Commenting on the impact of the political sabre-rattling, Old Mutual Global Investors' Ned Naylor Leyland, responsible for gold and silver investing, said any further escalation could serve to drive the metals' price even further.

Beyond geopolitical concerns, investors continued to size up company earnings reports. The Nasdaq composite fell 35 points, or 0.5 percent, to 6,336. The stock lost 89 cents to $3.82.

Blue Apron shares rose 6.73 percent after the meal-kit delivery service provider reported a rise in revenue in its first quarterly report since debut. The stock was the biggest gainer in the S&P 500, adding $8.02 to $45.25.

The benchmark U.S. yield yesterday was just above 2.2 per cent, at its lowest level since late June, as investors bought up Treasuries, a classic safe harbor.

Benchmark U.S. crude fell 22 cents to $49.17 a barrel 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. The euro fell to $1.1728 from $1.1757.

The Japanese yen hit an eight-week high against the US dollar, while spot gold also reached a two-month high.

Barrick Gold Corp (ABX.TO) rose 2.1 per cent to $21.7, while Goldcorp Inc (G.TO) rose 0.9 per cent to $16.29.

U.S. crude futures extended losses from Thursday when they tumbled 2 per cent on fears of slowing demand and lingering concerns over a global oversupply. The euro slid to $1.1752 from $1.1793.

"We would now be careful with a whiff of risk aversion in the air and, by extension, also stay away from shorts in the rates market", RBC's global macro strategist Peter Schaffrik said.

In Europe, France's CAC 40 fell 1.6 percent to 5,135 while Germany's DAX was down 1.3 percent at 12,133.

Other reports by Click Lancashire

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