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Dollar at eight-week low vs yen as North Korea tensions simmer

12 August 2017

The modest rebound came at the end of a turbulent week on Wall Street as escalating tensions between the US and North Korea rattled global markets.

The Dow closed down 205 points Thursday, in its biggest decline since May 17, after a string of retailers reported weak earnings and President Donald Trump rejected criticism that his threats to release "fire and fury" had been too inflammatory. Only utilities sector stocks eked out a gain on a day of mostly listless trading as investors kept an eye on the latest company earnings and geopolitical news.

Falls were also seen on Wall Street, with the Dow Jones Industrial Average down 0.5% about 15 minutes into trading and the Nasdaq (Frankfurt: 813516 - news) tumbling by 0.6%.

Stocks going ex-dividend included BT, Royal Dutch Shell (LSE: 0LN9.L - news), BP, Lloyds, and pharma companies GSK and AstraZeneca (NYSE: AZN - news), taking around 41 points off the index.

Markets also awaited USA inflation figures, as measured by the Consumer Price Index (CPI), which is set to signal how fast United States interest rates will rise. The stock shed $1.50 to $4.61.

In Europe, Germany's DAX fell 1.1 percent, while France's CAC 40 slid 1.4 percent. The stock lost $2.97 to $8.87.

Meanwhile, gold demand in India remained sluggish this week as local prices jumped to their highest level in almost three months and a rally in global prices dampened fresh buying elsewhere in Asia.

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The hope that the Fed will have to slow its rate-hike path appeared to stop, at least for now, the near $1-trillion loss in world stocks valuations this week triggered by the war of words between Pyongyang and Washington.

News that U.S. producer prices unexpectedly fell in July earlier helped send the USA dollar lower.

In Europe, the pan-continental STOXX 600 index lost 0.8 per cent, with falls deepening after reports a vehicle had rammed a group of soldiers in Paris, injuring six.

GOT A PULSE: Health care stocks, which have been in a slump, were headed higher.

"Tensions will continue to mount and could eventually develop into a "black swan" event that the markets are not prudently considering", Steve Hanke, professor of Applied Economics at the Johns Hopkins University, told the Reuters Global Markets Forum on Wednesday.

Tokyo's Nikkei 225 share index closed down 1.3 per cent at its lowest since 1 June as the strong yen hit exporters, while South Korea's KOSPI index fell 1.1 per cent to seven-week lows.

The euro edged 0.3 percent lower to 1.1726 against the dollar.

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Hong Kong was down 1.1%.

BONDS: Bond prices rose.

Benchmark 10-year notes US10YT=RR were last up 12/32 in price to yield 2.201 percent, from 2.242 percent late on Wednesday.

"Much of the rally (in gold) is because of the increased safe-haven demand", said OCBC Bank analyst Barnabas Gan. Silver gained 47 cents, or 2.9 percent, to $16.86 an ounce.

Korea's Samsung Electronics fell 2.8% Friday. Copper rose 4 cents to $2.94 a pound. Brent crude, used to price global oils, gained 56 cents to $52.70 in London.

The recent resilience of data on the United States economy has not dampened the latest climb, despite depressing prices earlier in the week as reports returned high employment figures ahead of further United States inflation information this week.

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