Published: Sun, August 13, 2017
Economy | By Annette Adams

Markets slide, dollar slumps as North Korea fears spike

Markets slide, dollar slumps as North Korea fears spike

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 euro slid 0.6 percent to 128.92 yen, and fell 0.1 percent against the dollar to $1.1735. The U.S. currency was down 0.5 percent at 109.73 yen, following a retreat to 109.740, its weakest since June 15.

A Reuters Datastream index of more than 7,000 stocks across the globe saw its market capitalization drop from a record high $61.36 trillion on Monday to $60.43 trillion at the close on Thursday.

Pyongyang responded to provocations from President Trump and said it would consider using missiles against US military bases in Guam.

Market analysts expect that the pullback in stocks due to the increasingly aggressive tone in exchanges between Washington and Pyongyang will continue, although investors hope that the selling will not escalate to a correction - a decline of 10 percent or more.

"What has changed this time is that the scary threats and war of words between the United States and North Korea have intensified to the point that markets can't ignore it", said Shane Oliver, head of investment strategy at AMP Capital in Sydney.

FIRE AND FURY: Keeping up his tough talk, Trump told reporters that North Korean leader Kim Jong Un's government should "get their act together" or face extraordinary trouble, and suggested his earlier threat to unleash "fire and fury" on North Korea was too mild.

He did not elaborate on Russia's joint plan with China, though the pair's position on North Korea has long consisted of formally voicing opposition to North Korea's nuclear ambitions but also to US military support for its allies in the region.

A Chinese state-run newspaper said on Friday that China should make clear that it will stay neutral if North Korea launches an attack that threatens the United States, but that if the US attacks first and tries to overthrow North Korea's government, China will prevent it doing so.

"Historically, the market impact from North Korea's nuclear provocations has been limited", James Cheo, Investment strategist at Bank of Singapore wrote in a note on Friday. "Hard to assess political risk is now intruding on this scenario".

The Taiwan dollar on Thursday fell 0.3 percent, putting it on track for its worst day in more than three weeks.

Japan is the world's biggest creditor nation and there is an assumption Japanese investors may repatriate their foreign holdings in times of heightened global uncertainty.

U.S. Treasury long-dated yields dropped to six-week lows, pressured by U.S.

The dollar eased slightly against a basket of major currencies .DXY to 93.356.

The spot price of gold was 0.6 per cent to $US1285.53 an ounce overnight. It soared over 2 percent in the previous two sessions, and is set for a weekly gain of 2.25 percent.

US crude fell 0.41 percent to $48.39 per barrel and Brent was last at $51.68, down 0.42 percent on the day. They plunged 2 percent on Thursday on fears of slowing demand and lingering concerns over a global oversupply. It slid 80 cents, or 1.5 percent, to close at $51.90 per barrel on Thursday.

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