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Stocks drift lower on Wall Street

14 August 2017
Stocks drift lower on Wall Street

Gold rose 1.2%, while the Swiss franc was on track to post its biggest single day increase against the euro in about two-and-a-half years.

Investor sentiment turned negative after North Korea said it was completing plans to fire four intermediate-range missiles over Japan to land near the US Pacific territory of Guam in an unusually detailed threat.

Financial markets have tended to quickly shake off North Korea's periodic saber-rattling in the past, dismissing it as bluster, but tensions have lingered this year amid signs that it is making progress in its ballistic missile program and on Trump's growing frustration with Pyongyang. "The U.S. president at a [golf] links again let out a load of nonsense about 'fire and fury, ' failing to grasp the on-going grave situation".

December gold settled up $10.80, or 0.8%, at 1,290.10/oz.

"Ahead of the US inflation numbers gold will likely trade sideways until there's more direction", said Fawad Razaqzada, an analyst at FOREX.com. The consumer discretionary index was one of its biggest losers with a 0.47 percent drop. The Nasdaq composite lost 96 points, or 1.5 percent, to 6,256.

In a note sent to clients late on Thursday, the US bank predicted the single currency would rise to $1.25 in the first quarter of next year and reach parity with sterling for the first time.

"A quick unwinding of prices to below $1,250 an ounce is very possible, especially if the tensions ease quickly and if global growth continues performing the way it is, with most incoming economic data suggesting a rosy economic outlook". Ten-year USA yields dropped 4 basis points to 2.242 percent US10YT=RR and German equivalents fell 3 bps to 0.43 percent DE10YT=TWEB, a six-week low.

As is often the case, Wall Street was treated to volatility in August, the stock market's most turbulent month. U.S. stock index futures also fell, with the S&P 500 indicated to open down 0.4 per cent.

When Japanese traders get back to their desks Monday, stocks will need to catch up with Friday's regional weakness and the yen's recent gains against the dollar, up 1.5% on the week.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7 percent, while Japan's Nikkei lost 1.4 percent as the stronger yen sapped investor appetite.

The dollar was further weighed down on Friday by the soft USA inflation data.

In bond markets, the yield on US Treasuries fell, also pressured by the lowered expectations for a Fed move. That "looks high enough to be consistent with a 5 percent-plus pace for real GDP growth", said Jim O'Sullivan of High Frequency Economics in a report.

In commodities trading, crude oil futures are slipping USD0.10 to USD48.49 a barrel after tumbling USD0.97 to USD48.59 a barrel on Thursday.