Asia stocks, US$ extend slide as US-North Korea tensions intensify

13 August, 2017, 14:14 | Author: Leticia Walters
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With the tense mood pushing European shares down for a third day and Wall Street set to fall again, global stocks were on course for their worst week since Donald Trump won November's USA presidential election.

Until this week, the equity market had managed to shake off negative news, including previous saber-rattling over North Korea and failures in Washington to pass high-profile bills, such as repealing and replacing Obamacare.

Trump warned North Korea again on Thursday not to strike Guam or USA allies, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.

Japan is the world's biggest creditor country and there is an assumption that investors there will repatriate funds in a crisis. Two weeks ago it saw its biggest weakly fall against the euro since the start of 2015. It was on course for a weekly rise of about 5%, the biggest such gain since July 2016.

The Japanese Yen has sharply appreciated against its major trading partners, following the escalation in geopolitical tensions between the United States and North Korea. "What we're seeing today is political tensions over North Korea and the United States. making people nervous", said Robert Pavlik, chief market strategist at Boston Private Wealth in NY.

"Heightened geopolitical risks overnight have seen the markets flip from risk-on to risk-off and we have to wait and see how long this move runs before adding some positions", said Viraj Patel, an FX strategist at ING in London.

Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a sell-off, and the tensions over North Korea have proved the trigger.

More than 430 stocks from all USA exchanges hit their lowest levels in 52 weeks or more on Thursday, the most for any session since mid-November right after Trump was elected.

"The level which we are looking at now is $1,300".

US -traded Nikkei futures (NKc1) fell 2 percent to their lowest since mid-May.

"Of course, it's all come at a time when share markets are due for a correction, so North Korea has provided a flawless trigger".

South Korea's Kospi sank 1.7 percent to 2,319.83 and Hong Kong's Hang Seng shed 1.8 percent to 26,946.81.

The S&P 500 dropped the most since May and MSCI's gauge of stocks across the globe .MIWD00000PUS lost 1.1 percent in its third straight day of declines, as it pulled further back from all-time highs.

A spokesman for the Korean People's Army said in a statement that it was "carefully examining" plans for a missile attack on the U.S. Pacific territory, which has a large American military base.

The euro eased 0.1 percent to $1.1766, staying below a high of around $1.1910 set last week, the euro's strongest level in 2-1/2 years. It is set for a weekly gain of 2.4 percent. They plunged 2 percent on Thursday on fears of slowing demand and lingering concerns over a global oversupply.

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