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North Korea nerves rattle stocks, lift gold, yen

10 August 2017

Asian equities fell, driving the region's benchmark index to its biggest loss in a month, on rising geopolitical risk after President Donald Trump warned the USA will retaliate against North Korea.

European bourses also looked set to open lower across the board, with Eurostoxx 50 futures already down 0.7 percent in early trade.

"It's incredible when you consider the headlines just how calm the equity markets are, how they've taken things in their stride", said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.

Wall Street stocks fell Tuesday amid rising tensions between the United States and North Korea, bringing the Dow's streak of nine straight records to an end.

The franc jumped 1.4 percent to 0.9611 francs per euro in early trades.

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Nasdaq 100 e-minis were down 39.75 points, or 0.67 percent, on volume of 53,600 contracts.

It also outlined detailed plans for a missile strike near Guam, which is more than 3,000 km (2,000 miles) to the southeast of North Korea and home to about 163,000 people, a U.S. Navy base that includes a submarine squadron and an air base.

The S&P 500 fell 0.68%, and the Nasdaq slid 1.1%. This would undoubtedly drive greater safe-haven demand for gold, which is traditionally seen as a stable asset during times of turmoil.

The S&P 500 volatility index, a measure of investor fear, rose for the second day.

In response to the growing tensions between a potentially nuclear North Korea and the Free World, markets went into panic mode late on Tuesday, and this is carrying over to the next trading day. The US Dollar has already been firmly on the back foot in the past few months and the possibility of confrontation with North Korea provides further reason to be bearish on the US currency, particularly against low risk currencies. The USD/JPY pair was trading at 110.072 Yen, up 0.13%. Gold was last up 1.4 percent, its highest point since mid-June, while the Swiss franc and the Japanese yen rose.

Wall Street swings lower on North Korea fears
Defence equipment makers attracted broad-based buying, with Ishikawa Seisakusho shares closing up as much as 5 percent. The Nasdaq Composite Index declined 0.2% to 6370.46 and the Standard & Poor's 500 Index slid 0.2% to 2474.92.

The Swiss franc on Wednesday held near the day's highs after posting its biggest single-day rise against the euro since the central bank removed its cap on the currency in January 2015. The yield on the 10-year Treasury note slipped to 2.22 percent from 2.25 percent late Wednesday. Lockheed Martin, Raytheon, General Dynamics and Northrop Grumman and the Dow Jones U.S. defense index was up 1.48 percent after hitting a record high. Brent crude, used to price worldwide oils, added 10 cents to $52.80.

"The index is showing a warning sign as it is rising after U.S. shares staged a rally recently", Kagawa said, adding that investors could be positioning for a possible sharp sell-off in the near future.

Spot gold XAU= added 0.2 percent to $1,260.26 an ounce.

Copper lost 0.39 per cent to US$6,455.00 a tonne.

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North Korea nerves rattle stocks, lift gold, yen