North Korea tensions spook financial markets

Paterniano Del Favero
Agosto 12, 2017

This may explain why financial markets have adopted a safety first approach to events over the last twelve hours, as government bonds push higher and the Swiss franc, gold and the yen catch a bid. This week has seen its biggest rise since June 2016.

"Our outlook anticipates a continued moderate growth trend, with some further strengthening in the labor market and an increase in inflation over the medium term toward our objective of 2 percent", Dudley said in prepared remarks that did not specifically mention monetary policy.

Stella-Jones Inc rose 7.2 percent to C$46 after the wood products producer reported better-than-expected quarterly earnings and revenue.

This increase in tension between the USA and North Korea seem to be affecting the oil prices as well as they have dropped through the $49 region and now trade just above the $48 region as of this writing and continues to look weak. At the same time, North Korea dismissed threats by President Trump as a lot of "nonsense".

"Of course, it's all come at a time when share markets are due for a correction, so North Korea has provided a flawless trigger". "Pretty remarkable, perhaps even extraordinary, considering", said Tim Ash, strategist at fund manager BlueBay.

Spot gold was up 0.2 per cent at $1,287.90 per ounce at 0042 GMT.

The pan-European FTSEurofirst 300 index lost 1.19 percent.

"We've had some competing forces play out over the past 12 hours - the U.S. dollar was stronger off economic data, but that was quickly reversed with President Trump's comments about North Korea earlier today (Wednesday)", said ANZ analyst Daniel Hynes.

"This situation is beginning to develop into this generation's Cuban Missile crisis moment", ING's chief Asia economist Robert Carnell wrote in a note.

Gold hit the highest levels in two months on Thursday as the United States and North Korea exchanged more threats, prompting investors to buy bullion as a safe haven asset. It soared over 2 percent in the previous two sessions, and is set for a weekly gain of 2.25 percent.

Disappointing economic data releases weighed on both sides of the Atlantic today with a negative goods trade balance for the United Kingdom (-0.1% versus expectations of 1.4%), higher unemployment claims from the U.S. (244,000) and also a negative month-on-month PPI figure for the USA (-0.1%). It is poised to end the week down 1.9 percent.

Away from the geopolitical drama, US inflation data is due at 1330 GMT. This will give a hint on whether the inflation continues to build, which will help the Fed to hike rates, or whether the recovery in the USA economy, as evidenced in the strong NFP report from last week, was just a flash in the pan and this could then determine the short term direction for gold.

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