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Stocks tumble as North Korea tensions escalate; euro tops $1.20

Japan's Nikkei hit a four-month low before paring losses to end 0.5% down

Reuters  |  Milan 

global markets

World stocks tumbled and safe-haven assets jumped on Tuesday after 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 above a key level, while US futures fell as much as 0.85% on the missile before paring losses.

Japan's 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 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."

fired a missile that flew over and landed in the Pacific about 1,180 km (735 miles) off the northern region of Hokkaido in a sharp escalation of tensions on the Korean peninsula.

has conducted dozens of ballistic missile tests under young leader Kim Jong-Un, but firing projectiles over mainland is his first.

"The missile flew across this time, so the implications will likely be a bit different from previous ones," said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

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 warned that Pyongyang would face "fire and fury" if it threatened the United States.

The was down 0.6% at 108.63 yen after hitting its lowest level since mid-April despite Japan's proximity to

The yen tends to benefit during times of geopolitical or financial stress because 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 falling 0.6 percent to a one-month low against the Swiss currency.

Though the risk-averse mood prevailed broadly across financial markets, the appeared immune to the geopolitical

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.

SHINES

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 think the only realistic option for the US and 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.

"But no one can rule out the risk of accidents. think the chicken game will continue for now and will remain a risk," he added.

Crude 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.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, August 29 2017. 15:04 IST
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