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Global stocks slide as US-North Korea nuclear tensions rise

12 August 2017
Global stocks slide as US-North Korea nuclear tensions rise

Investors reacted by driving up the price of gold and bonds, traditional safe-haven plays.

Tensions on the Korean Peninsula have increased since the Democratic People's Republic of Korea (DPRK) rattled nations around the globe by conducting what some global observers believe were two intercontinental ballistic missile (ICBM) tests in July. MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.68 percent, snapping a brief foray into posiive territory early in the day and extended losses from Wednesday.

The franc's surge against the dollar is likely to flush out some leveraged bets as some hedge funds had used the lower yielding franc as a borrowing currency to invest in others, such as euro assets, in the last three weeks.

The Standard & Poor's 500 index slipped 0.90 points, or 0.04 percent, to 2,474.02.

Some traders said foreign investors had already been looking for a reason to take profits after the benchmark index had climbed almost 20 per cent so far this year.

"At the moment, it is unclear how the Korean situation will play out and that is hampering the markets".

According to the Marine Corps, the live-fire drills also involved AH-1S Cobra's 2.75-inch rockets, hosted by the Northwest Islands Defense Command in charge of defending the South's northernmost islands in the Yellow Sea, and the 6th Brigade. "Furthermore, the benchmark Treasury yield also climbed away from lows", said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo. Bids into the Japanese yen and Swiss franc, currencies that find demand in times of geopolitical anxiety, also tapered.

The Japanese yen strengthened 0.35 percent versus the greenback at 109.94 per dollar. And when the S&P 500 breaks a streak of 50+ trading days without a 1%+ up move, the index actually averages a decline over the next month and a gain of just 0.86% over the next three months.

The dollar index, which tracks the greenback against a basket of six major rivals, edged down 0.1 percent to 93.545.DXY, edging closer to last week's 15-month low of 92.548.

The producer price index and the consumer price index data due Thursday and Friday, will offer market participants fresh insight on whether the pace of inflation remains subdued - the slowdown inflation has been a key concern for the Federal Reserve. Investors will study the numbers to get a feel for the USA inflation trend and any impact the data could have on the Federal Reserve's monetary policy.

The S&P fell as much as 0.52 percent at its session low.

Crude oil was 0.5 percent higher with prices at $49 per barrel.

"Tensions are still high and not going away at the moment". The strength in the sector came as gold for December delivery jumped $10.80 to $1,290.10 an ounce.