ALSO READGlobal stocks tumble, yen gains after North Korea fires missile over Japan Global markets: Shares rally, yen and gold fall as Korea tensions ease Trump's tweet on Obama hurt global markets; US dollar gains Sensex tanks over 300 points; auto, banking stocks drag Wall Street slips as tensions with North Korea rattle investors
World stocks tumbled and safe-haven assets jumped on Tuesday after North Korea fired a missile over northern Japan, fuelling worries of fresh tension between Washington and Pyongyang.
The pan-European STOXX 600 index fell more than 1% to a six-month low, also weighed down by the surge of the euro above a key level, while US futures fell as much as 0.85% on the missile news before paring losses.
Japan's Nikkei hit a four-month low before paring losses to end 0.5% down. South Korea's Kospi, meanwhile, shed as much as 1.6%, helping to drag down MSCI's broadest index of Asia-Pacific shares outside Japan by 0.5%.
"The North Korean escalation has triggered a significant risk-off move," Alessandro Balsotti, head of asset management at JCI Capital Limited, said in his daily note to clients.
"However ... observers believe it won't be enough to trigger a material reaction from the United States-South Korea axis. It wouldn't be surprising, then, if investors take advantage of this geopolitical fear to buy the dips."
"The missile flew across Japan this time, so the implications will likely be a bit different from previous ones," said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
North Korea threatened this month to fire missiles into the sea near the US Pacific territory of Guam, host to major US military installations, after US President Donald Trump warned that Pyongyang would face "fire and fury" if it threatened the United States.
The yen tends to benefit during times of geopolitical or financial stress because Japan is the world's biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis materialize.
Also the safe-haven Swiss franc strengthened, with the dollar falling 0.6 percent to a one-month low against the Swiss currency.
The single currency surged above 1.20 to the dollar, breaching a key level as investors grew bullish about its outlook after the head of the European Central Bank refrained from talking about the currency's recent strength and in the backdrop of brewing US fiscal problems.
"The market is still digesting Draghi's comments from Jackson Hole and the U.S. outlook is looking difficult with concerns around the budget and a looming shutdown," said Esther Maria Reichelt, an FX strategist at Commerzbank in Frankfurt.
Gold prices jumped 0.85% to $1,321 an ounce, hitting its highest level in more than nine months and rising for a third straight session.
The metal also drew support from uncertainty surrounding the Trump administration after remarks last week raised fears of a government shutdown.
Investors also rushed to the safety of US Treasuries, pushing down the 10-year yield to a low of 2.1%, its lowest since mid-November, while the yield on Germany's 10-year government bond fell 3 basis points to 0.34%, the lowest since June 28.
"Financial markets think the only realistic option for the US and North Korea will be to sit down and talk at some point because other options are too costly for everyone involved," said Masayoshi Kichikawa, chief strategist at Sumitomo Mitsui Asset Management.
Crude oil prices bounced back a tad on the back of supply disruptions in Colombia and Libya, a day after US crude futures dropped on worries that refinery shutdowns caused by flooding could boost inventory.
US West Texas Intermediate (WTI) crude futures rose 0.26% to $46.69 a barrel after falling to as low as $46.15 in the previous session.
US gasoline price, which surged as much as 7% to a two-year peak of $1.7799 a gallon on Monday, traded at $1.7263 in early Tuesday trade.
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