Asian stocks slump on profit-taking amid US-NKorea tensions

Paterniano Del Favero
Agosto 13, 2017

Amid broad based weakness on Wall Street, biotechnology stocks turned in some of the market's worst performances on the day. As well, producer prices in Japan rose 0.3% on month in July, a tick higher than the 0.2% gain seen and at a 2.6% gain on year, also beating expectations.

On the currency markets, the pound was down to a three-week low against the USA dollar but mainly due to earlier disappointing output and trade data.

Focusing on United Kingdom stocks, Old Mutual was among the biggest fallers after saying it was taking a "cautious" approach to the dividend despite hiking half-year profits.

In Australia, the S&P/ASX 200 advanced 0.41 percent, with the index driven by broad-based gains, with only the energy and utilities sub-indexes registering slight losses.

"If you strip away what's going on in North Korea, and if you strip away what's going on in Washington, which are things that are tougher to predict, the economy, the global recovery, earnings, it all paints a very positive picture for the rest of the year", Kravetz said. Should they start re-allocating, we believe a big move in global gold prices will inevitably ensue.

Nervous investors drove shares lower earlier in the week, after President Trump declared Tuesday that the USA would react with "fire and fury" to further nuclear provocations from North Korea.

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

"Sound dialogue is not possible with such a guy bereft of reason and only absolute force can work on him", a report by the North's state-run KCNA news agency said of Trump.

The 30-year bond US30YT=RR last rose 28/32 in price to yield 2.7759 percent, from 2.818 percent late on Wednesday. USA and British equivalents were also trading a touch above Wednesday's six-week lows.

Amid the hot rhetoric, US stocks sold off sharply on Thursday, with the S&P 500 falling more than 1 percent. Earlier in the session, it marked its highest since June 8 at $1,288.92 an ounce. A U.S. Navy destroyer sailed within 12 nautical miles of an artificial island built up by China in a challenge to Beijing's territorial claims, officials told Reuters.

The US Consumer Price Index (CPI) edged up 0.1% last month after staying flat in June and falling by 0.1% in May. Brent crude, used to price worldwide oils, rose 20 cents to $52.10 a barrel in London.

There have been some markets which have benefited from the U.S. The Russell 2000 index gave up 1.7 per cent to 1,372.54.

While North Korean geopolitical risks are likely to weigh on Asian markets for now, investors are expected to shift their focus to monetary policy into the end of the week, IG market strategist Jingyi Pan said in a note. "Therefore one shouldn't make a big call".

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