- Gold, Yen Gain on North Korea Tension; Stocks Drop
A risk-off tone gripped markets on Wednesday, with gold and the Japanese yen advancing and Treasuries edging higher as tension grew between the U.S. and North Korea. European stocks slumped following declines across most of Asia, while oil retreated.
The yellow metal headed for it’s largest gain this month while the yen and Swiss franc were the biggest gainers among G-10 currencies after President Donald Trump ratcheted up his rhetoric against North Korea to an unprecedented level. Almost every sector of the Stoxx Europe 600 Index fell while emerging markets equities were poised for the biggest drop in more than a month. Oil edged lower on supply concerns and South Africa’s rand extended losses after the 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.
“The market is realizing that economies are doing well enough for both the Fed and the ECB to remove stimulus,” Ken Peng, a Hong Kong-based investment strategist at Citi Private Bank, said. “This is going to make a lot of people a bit more nervous about liquidity. In that environment, these geopolitical headlines will have more impact, more punch. The talk is more intense than it used to be.”
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.
- Japan’s Topix index fell 1.1 percent, the most since May 18. Australia’s S&P/ASX 200 Index bucked the region-wide downward trend to add 0.4 percent. The Hang Seng Index in Hong Kong lost 0.2 percent and China’s Shanghai Composite Index was also down 0.2 percent.
- The yen rose 0.3 percent to 110.01 per dollar, an eight-week high.
- The Stoxx Europe 600 Index declined 0.5 percent as of 8:17 a.m. in London, the largest drop in more than a week on a closing basis.
- The MSCI All-Country World Index declined 0.2 percent to the lowest in more than a week.
- The U.K.’s FTSE 100 Index declined 0.6 percent, the first retreat in a week.
- Germany’s DAX Index sank 0.7 percent, the biggest dip in almost two weeks.
- Futures on the S&P 500 Index sank 0.2 percent to the lowest in more than three weeks.
- The euro decreased less than 0.05 percent to $1.1751.
- The Bloomberg Dollar Spot Index declined less than 0.05 percent.
- The British pound climbed 0.1 percent to $1.3011, the first advance in a week.
- South Africa’s rand dipped 0.5 percent to 13.4443 per dollar.
- The yield on 10-year Treasuries declined one basis point to 2.25 percent.
- Germany’s 10-year yield decreased one basis point to 0.46 percent.
- Britain’s 10-year yield dipped two basis points to 1.133 percent, the lowest in six weeks.
- Gold gained 0.6 percent to $1,268.44 an ounce.
- West Texas Intermediate crude declined 0.1 percent to $49.11 a barrel.