Wall Street Starts to Pay Attention to North Korea Tensions

Michael Kors store in Edinburgh

Michael Kors store in Edinburgh Source

"Although it is considered highly unlikely that this tension will escalate into a nuclear war, the market still needs to see how President Trump will eventually deal with his advocating "fire and fury" against North Korea's threat", said Margaret Yang Yan, market analyst at CMC Markets Singapore.

The Standard & Poor's 500 index dropped 35.81 points, or 1.4 percent, to 2,438.21. "Risk aversion is still very much a concern for markets", said Shaun Osborne, chief currency strategist, at Scotiabank in Toronto.

"The yen is the big story really".

Europe's main London, Frankfurt and Paris markets started between 0.5 and 1.1 percent lower and Germany's ultra-safe 10-year government bonds were trading at their highest prices since June.

Disappointing quarterly results from big department store chains also weighed down the market.

Coupled with a continued simmering tension between the United States and North Korea, that trio of data led to another positive day for safe haven currencies such as the Japanese yen and Swiss franc (CHF).

NAB, which lifted its third-quarter cash profit five per cent to $1.7 billion, closed down one per cent at $30.17, while Westpac fell 1.3 per cent to $31.61 and the Commonwealth Bank declined 0.7 per cent to $80.50. Macy's was down 4.4 percent after the company said its sales continued to decline in the second quarter.

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South Korea's KOSPI fell 1.8 percent to an 11-1/2-week low, but its losses for the week are a relatively modest 3.2 percent.

Gold-related stocks were well-supported with Newcrest Mining up 2.1 per cent at $21.85 and Evolution Mining up 2.2 per cent to $2.34. Broadcom gave up $5.72, or 2.3 percent, to $243.45. Crude oil prices extended their slide as exports from key OPEC producers rose, despite news of lower crude shipments from Saudi Arabia.

ENERGY: Benchmark U.S. crude added 28 cents to $49.45 per barrel in electronic trading on the New York Mercantile Exchange. Wholesale gasoline dropped 2 cents to $1.60 a gallon, while heating oil shed 2 cents to $1.63 a gallon. The dollar was down 1.2 percent at 0.9627 Swiss francs, while an ounce of gold was 1 percent higher at $1,275.

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 USA (244,000) and also a negative month-on-month PPI figure for the U.S. (-0.1%). Copper fell 2 cents to $2.90 a pound.

CURRENCIES: The dollar slipped to 109.98 yen from 110.06 late Wednesday in Asia. Against the yen, the euro last traded at 128.29 yen, down 0.2 percent.

Japan's benchmark Nikkei 225 inched down less than 0.1 percent to finish at 19,729.74.

"A combination of softer euro zone economic data, solid USA reports and market positioning all resulted in a markedly heavier tone for the single currency", Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, said in a note. Economists had expected productivity to increase by 0.7 percent.

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