North Korea Has Markets Nervous But Not Panicked

Traders work on the floor of the NYSE in New York

Traders work on the floor of the New York Stock Exchange in New York U.S

"More likely than anything else, the price action was a function of an overextended USA equity market that has been in need for a healthy correction off record highs", LMAX Exchange analysts said in a morning note. The contract shed 22 cents on Tuesday to close at $49.17.

The yen tends to benefit during times of geopolitical or financial stress as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors there will repatriate funds should a crisis materialize.

Wider Asian markets down: Japan's Nikkei stock index closed down 1.33%, the Hong Kong Hang Seng index is down 0.35%, and China's Shanghai Composite is down 0.28%.

A man watches a television screen showing U.S. President Donald Trump, left, and North Korean leader Kim Jong Un during a news program at the Seoul Train Station on Thursday.

The U.S. central bank left its benchmark rate unchanged in July amid concerns about the slowdown in inflation but expressed optimism that its long-term target of about 2% inflation would be met.

US Treasury long-dated yields dropped to six-week lows, pressured by US-North Korea tensions and the weak data that further reduced expectations of an interest rate hike in December. The remarks, following North Korea's earlier revelation of a plan to launch a salvo of ballistic missiles toward the U.S. Pacific territory of Guam, gave investors further incentive to take to the sidelines at least in stock markets.

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Missile makers Raytheon and Lockheed Martin have outperformed Wall Street by nearly four per cent in recent days and the Dow Jones US defence index is at a record high and on a seven-day unbroken run of gains. The dollar index, which measures its strength against a basket of currencies, was roughly flat at 93.420.

The dollar held steady at 110.02 yen JPY= , having pulled up from Wednesday's low of 109.56 yen, its lowest level since June 15.

Markets are now awaiting United States consumer price data for July, due later today.

Equity markets around the world had fallen as the war of words between the U.S. and North Korea escalated, with the Dow recording its second negative close, although its 0.2 per cent loss was smaller than in other bourses. The euro fell to $1.1728 from $1.1757. The next key data on focus will be tomorrow's CPI figures which should shed more light on the path of the USA inflation.

Gold futures for December delivery climbed 1.3 per cent to settle at $1,279.30 (U.S.) an ounce on the Comex in NY. Brent crude, used to price worldwide oils, added 26 cents to $52.96. For the week, the metal rose 2.3 per cent the strongest weekly gain since the week ended April 13.

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