Nuclear nerves wipe $1 trillion off world stocks

Randall Padilla
August 14, 2017

The dollar set an eight-week low against the yen on Friday as escalating tensions between the United States and North Korea triggered yet more investor flight to safety.

New York Federal Reserve President William Dudley expects sluggish US inflation to rise over the next several months.

"The war of words between the leaders of the US and North Korea continues to dominate investor sentiment", said Forex.com technical analyst Fawad Razaqzada.

"The market is trying to interpret the CPI data as somewhat positive because it is anticipating that the Fed will be on hold not only in September but also possibly in December", said Robert Pavlik, chief market strategist at Boston Private Wealth.

Tokyo's Nikkei index had dropped 1.3% by the time European stock markets opened on Wednesday morning, with similar falls on the German and French bourses.

Shortly after Trump made his remarks, North Korea said it was "carefully examining" the idea of a missile strike on Guam, a U.S. Pacific territory.

President Donald Trump warned North Korea on Tuesday about facing "fire and fury" if North Korea delivers more threats against the U.S.

On Friday, the S&P 500 rose 3.11 points, or 0.1 percent, to 2,441.32.

"There's not a great incentive to buy big", said Lerner of SunTrust Advisory.

The North Korea situation isn't the only thing weighing on stocks.

The Dow Jones Industrial Average rose 43 points, or 0.2%, to 21,885, led by Apple Inc.

"Pretty remarkable, perhaps even extraordinary, considering", said Tim Ash, strategist at fund manager BlueBay.

The S&P's record close on August 7 likely helped fuel its latest sell-off.

Many markets have recently climbed to record or multi-year highs, leaving them vulnerable to a sell-off.

CURRENCIES: The euro slipped 0.1 percent to $1.1176 while the dollar was steady at 109.20 yen.

The yen tends to benefit during times of geopolitical or financial stress as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors there will repatriate funds should a crisis materialise.

South Korea's KOSPI fell 1.8 per cent to an 11-1/2-week low, taking its losses this week to 3.2 per cent.

"If the data continues to come in on the softer side, the market might start to price the Fed staying on hold this year", said Sireen Harajli, FX strategist at Mizuho in NY. The Russell 2000 index of smaller-company stocks picked up 1.69 points, or 0.1 percent, to 1,374.23.

Sterling was last trading at $1.3007, up 0.25 percent on the day.

German and US sovereign bond prices also rose on the fear trade, sending yields lower despite recent strong readings of economic growth. "But we're in a low inflationary environment, which can help valuations remain elevated for longer than they would otherwise".

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.

Spot gold prices were little changed at $1,286.05 an ounce, after touching a two-month high earlier. CP Foods, one of the world's biggest poultry, pork and seafood processors, is forecast to rally 28 percent within a year, the top projected gain based on consensus analyst price targets compiled by Bloomberg.

Crude oil prices extended their slide as exports from key OPEC producers rose, despite news of lower crude shipments from Saudi Arabia. The Nasdaq is on track for a weekly loss of 1.5%, its worst since June.

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