- Havens Jump on North Korea Tension; Stocks Slide
A risk-off tone gripped markets on Wednesday, with gold, the Japanese yen and bonds rising as tension grew between the U.S. and North Korea. European stocks slumped following declines across most of Asia.
The yellow metal headed for its largest gain this month while the yen and Swiss franc were the biggest advancers among G-10 currencies after President Donald Trump ratcheted up his rhetoric against North Korea. Treasuries and most European government bonds climbed amid the shift to safer assets, while every sector of the Stoxx Europe 600 Index fell and emerging markets equities were poised for the biggest drop since June 15. The rand extended losses after South Africa’s president survived a no-confidence vote.
Volatility gauges from the U.S. to Japan rose after Trump said in response to a Washington Post report on North Korea’s nuclear capabilities that further threats from the country would be met with “fire and fury.” North Korea said it’s examining an operational plan for firing a ballistic missile toward Guam.
“Trump in his reactions is something new for all of us,” Geraldine Sundstrom, portfolio manager at Pimco Europe, said in an interview on Bloomberg TV. “Given the nature of the threats, given the players are new, it makes the situation a little bit unusual,” said Sundstrom, who recommended safe haven trades and minimizing risks through duration.
Meanwhile, China’s producer price gains held steady in July on surging commodity prices. The numbers came ahead of Friday’s U.S. inflation numbers which will provide another clue on the interest-rate outlook for the world’s biggest economy.
