Published: Sat, August 12, 2017
Money | By Armando Alvarado

Nikkei flat as North Korea fears recede; financial stocks tumble

Nikkei flat as North Korea fears recede; financial stocks tumble

There were further tensions surrounding North Korea on Thursday with the Pyongyang regime claiming that missiles which could be used to target the Pacific island of Guam would be ready to launch by mid-August. Hong Kong's Hang Seng Index plunged by 2 percent, while South Korea's Kospi Index slumped by 1.7 percent.

The Federal Reserve is also scheduled to release the minutes of its latest monetary policy meeting, which may shed some light on the outlook for the interest rates.

Emerging market stocks lost 1.27 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.47 per cent lower.

US stocks have risen week after week this year - with the S&P up more than 9 percent - in extremely low volatility, as strong corporate earnings and an improving global economy offset disappointment that President Donald Trump's promises to lower corporate taxes and implement a massive infrastructure spending have so far failed to see the light of day. "Pretty remarkable, perhaps even extraordinary, considering", said fund manager BlueBay strategist Tim Ash.

Excessive geopolitical fears surrounding North Korea seemed to have receded, traders say, but activity is expected to stay subdued with Japanese markets closed on Friday.

The focus on North Korea has largely overshadowed a Labor Department report showing an unexpected drop in US producer prices in the month of July. The risk-off tone triggered by the increase in tension between the USA and North Korea yesterday picked back up during today's United States session. The news drove investors out of risky assets and into safe-haven assets like gold, U.S. Treasurys and the Japanese Yen.

Gold hit a two-month high of US$1,278 an ounce amid the nervousness.

State says Trump on 'same page' as U.S. officials
Nauert said the pressure by the US and others on Pyongyang "is working". He's a Cabinet secretary. "He carries a big stick".

Dai-ichi Life Holdings dropped 1.8 per cent, T&D Holdings fell 2.4 per cent while Mitsubishi UFJ Financial Group declined 1.1 per cent. The data suggested little sign of inflationary pressure within the economy.

The MSCI World index slipped 0.1 percent, extending Thursday's 1.1 percent drop, its biggest one-day slide since May 17, as U.S. President Donald Trump stepped up his rhetoric against North Korea.

The Labor Department said its producer price index for final demand edged down by 0.1 percent in July after inching up by 0.1 percent in June.

Low U.S. Treasury yields are also weighing on the dollar. "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 note. The September copper contract was down two cents to US$2.91 a pound. The Dow is down 123.95 points or 0.6 percent at 21,924.75, the Nasdaq is down 95.89 points or 1.5 percent at 6,256.44 and the S&P 500 is down 23.40 points or 1 percent at 2,450.62. The 30-year bond was last up 4/32 in price to yield 2.7871 per cent, from 2.794 per cent late on Thursday.

The Korean story has seen the yen gain around 1.5 percent this week, its biggest rise since mid-May.

If the North Korean regime "does anything" to the United States or a USA ally "things will happen to them like they never thought possible", he told reporters on Thursday, according to Bloomberg.

U.S. crude rose 0.41 per cent to US$48.79 per barrel and Brent was last at US$52.01, up 0.21 per cent.

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