North Korea tension pushes investors to safety exits
Mr Trump’s remarks that North Korea would face “fire and fury like the world have never seen” weighed on Wall Street and drove up the VIX “fear gauge”. VIX tracks the cost of protection against a drop in the S&P 500.
A spokesman for the Korean People’s Army said it was “carefully examining” plans for a missile attack on the US Pacific territory of Guam, which has a large US military base.
The pan-European FTSEurofirst 300 index lost over 0.75% and MSCI’s gauge of stocks across the globe shed 0.37%.
Here, the Irish bank shares at one stage fell sharply. AIB fell as much as 1% but later trimmed its losses to end only slightly lower at €4.88.
Bank of Ireland shares fell almost 1% to €7.04 and Permanent TSB fell over 2.5% to €1.85. Shares in Kerry, which reports half-year earnings later today, were also down sharply, by 2.25%.
“Geopolitics splashed cold water on the markets,” said JJ Kinahan, chief strategist at TD Ameritrade. “There’s uncertainty and caution as investors nervously eye the next foreign policy moves.”
Joshua Mahony, market analyst at online trader IG, said the early stock sell-off calmed down somewhat, as “safe havens continue to gain favour as markets monitor the growing tensions surrounding North Korea”.
Emerging market stocks lost over 1%, while Japan’s Nikkei lost almost 1.3%. Traditional safe-haven currencies including the Swiss franc and Japanese yen rose against the dollar, while those from emerging markets slid.
“Obviously we are looking at the increased tensions between the US and North Korea,” said Brad Bechtel, managing director FX at Jefferies in New York.
“Tensions are still high and not going away at the moment. Safe havens are bid and markets are a little uneasy,” he said.
The euro was trading at slightly above $1.17 and fell back slightly to 90.45p. South Korea’s won dropped almost 1% against the dollar to its lowest close since July 13.
The Swiss franc reversed a two-week losing streak, rising 1% against the dollar.
It was on track for its biggest daily gain against the euro since the Swiss National Bank removed its cap on the currency in January 2015. Yields on core government debt fell. Benchmark US 10-year notes rose to yield over 2.228%. The 30-year Treasury bond rose to yield over 2.806%.
“The most visible impact of escalating verbal threats between North Korea and President Trump comes at the long end of the US Treasury curve,” said Jim Vogel, interest rates strategist at FTN Financial in Memphis.
Oil prices edged higher after a report showed US refineries processed record amounts of crude in the latest week, eating into inventories, although a surprise jump in gasoline stockpiles limited gains.
US crude rose to $49.23 per barrel and Brent was trading up, at $52.33 a barrel.
Gold hit its highest in almost two months after Mr Trump added to the geopolitical anxiety by boasting of the strength of the US nuclear arsenal.
Spot gold added 1% to $1,272.83 an ounce.
Reuters and Irish Examiner staff
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