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Global markets jarred by North Korea fears

13 August 2017

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.

Gold prices continued to climb on Friday, as geopolitical tensions between the US and North Korea kept safe-haven demand elevated while data showing July inflation undershot expectations, lessened the prospect of a rate hike this year.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 percent, while Japan's Nikkei lost 1.3 percent as the stronger yen sapped investor appetite. Earlier, the average had been down more than 88 points. The Nasdaq composite gained 39 points, or 0.6 percent, to 6,255. The South Korean won sank around 0.8 per cent to 1,133.8 to the dollar, its lowest since July 14.

The S&P 500 index had its biggest one-day drop in nearly three months on Thursday as investors fled riskier assets, with technology stocks leading the charge, in response to an increasingly aggressive exchange of threats between the United States and North Korea.

Such tensions remained high, with North Korea's state media saying on Thursday that North Korea will develop a plan by mid-August to launch intermediate-range missiles at the US territory of Guam.

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"If you strip away what's going on in North Korea, and if you strip away what's going on in Washington, which are things that are tougher to predict, the economy, the global recovery, earnings, it all paints a very positive picture for the rest of the year", Kravetz said.

Coupled with a continued simmering tension between the United States and North Korea, that trio of data led to another positive day for safe haven currencies such as the Japanese yen and Swiss franc (CHF). But the moves were modest.

Spot gold added 0.7 per cent to $1,285.70 an ounce.

The U.S. North-Korea tensions add to investor angst that has helped push up gold more than 10 percent this year, even with equities hitting records and the Federal Reserve keen to shrink its balance sheet.

"There are four more [inflation] prints between now and the December FOMC meeting and we expect the Fed to remain data-dependent, if a touch more cautious", TD Securities said in a research note.

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Tensions between the USA and North Korea ratcheted up on Friday , as President Donald Trump doubled down on military threats. At the same time, Beijing will respond if the US and South Korea strike first and try to overthrow the North Korean regime.

US Secretary of State Rex Tillerson on Wednesday warded off - at least for now - the prospect of massive losses on the Wall Street market after stressing that there was "no imminent threat of war" and that Americans could "sleep well at night". The stock slid $9.41, or 5.7 percent, to $155.33.

France's CAC dropped 1.6% and Germany's DAX fell 1.3%.

Shares of J.C. Penney (JCP) are moving sharply lower in pre-market trading after the department store operator reported a wider than expected second quarter loss despite better than expected revenues.

Crude oil futures are slipping USD0.10 to USD48.49 a barrel after tumbling USD0.97 to USD48.59 a barrel on Thursday. It slid 80 cents, or 1.5 percent, to close at $51.90 per barrel on Thursday.

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Global markets jarred by North Korea fears