Published: Fri, August 11, 2017
Economy | By Annette Adams

Global safe-haven trades jump on escalating North Korea tensions

Global safe-haven trades jump on escalating North Korea tensions

The dollar carried over its weakness from overnight trading overseas, where dollar selling gathered steam following a news report citing USA intelligence officials as saying that North Korea has succeeded in making a nuclear warhead that is small enough to be mounted on its missiles.

Cracks are showing in what has been a virtually non-stop US equity rally after a rapid escalation of tension between North Korea and the United States this week.

The South Korean capital, Seoul, is within range of massed North Korean rockets and artillery, which would be impossible to destroy in a first USA strike.

"It's surprising that given Japan's proximity to North Korea the yen is seeing any benefit from risk aversion", said Lennon Sweeting, chief market strategist for XE.com, in Toronto.

Hong Kong stocks dipped sharply at the open: Falls in China have been nearly doubled by Hong Kong's Hang Seng index, which were down by 1.2% shortly after the index opened at 11:30am AEST. Secretary of State Rex Tillerson later insisted the US isn't signalling it's about to mete out a military response despite threats from North Korea suggesting it could attack Guam, a USA island territory in the Pacific.

The positive earnings helped lift USA stocks to record highs.

"Japanese equities hadn't been rising much despite positive earnings results, so investors had started jumping at shadows, doubting whether they should really be holdings onto Japanese stocks".

However, shares of Dean Foods tumbled, trading 20.1 per cent weaker at US$11.96 as of 2.24pm in NY, after the United States dairy processor posted quarterly results that fell short of expectations and downgraded its full-year forecast amid "a challenging and rapidly evolving retail environment". "I do think we could see markets pull back between 1 and 5 percent".

That prompted North Korea to say it was considering firing missiles at Guam, a U.S. Pacific island territory.

Manulife Financial Corp was down 1.1 percent to C$25.64.

Earlier on Wednesday, US stocks were trading lower after President Trump's warning to North Korea to "not make any more threats" is met by just that as North Korea ratcheted up tensions threatening missile strike action against US military installations near Guam.

In the NY session, U.S. wholesale inventories for June are set for release.

Macy's tumbled 10.2 percent after the company said its sales continued to decline in the second quarter. US shares were also set to dip, with Dow and S&P futures both inching down 0.1 percent.

The dollar slipped to 109.26 yen from 109.85 late Wednesday. WTI crude was up 0.3% at $49.72 a barrel in late European session, while Brent crude was 0.8% firmer at $53.13 a barrel. -North Korea tension weighed, offsetting higher oil prices and stronger-than-expected domestic housing data.

"With the ongoing problems we have with North Korea there's always the possibility of war", said Dr. Wilson.

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