North Korea standoff wipes $1trn off global stocks

Bruno Cirelli
Agosto 13, 2017

Wall Street put a floor under global equities on Friday after a weak inflation reading brought investors back into US stocks even as tensions between the United States and North Korea continued to escalate, though the geopolitical fears still drove safe-haven buying of gold and the yen.

"Much of the rally (in gold) is because of the increased safe-haven demand", said OCBC Bank analyst Barnabas Gan.

The Swiss franc and the Japanese yen are often sought in times of geopolitical tension and have logged big gains against the dollar this week after U.S. President Donald Trump warned North Korea that it would face "fire and fury" if it threatened the United States.

Australian shares were down 1.3 percent, set for a weekly loss of 0.6 percent and Chinese and Hong Kong bluechips lost 1.6 percent and 1.9 percent respectively.

Nervous traders have scrambled to take refuge in traditional safe havens such as gold, silver, bonds, Japanese yen and Swiss franc, dampening interest in risk assets such as equities and industrial commodities. Earlier in the session, it marked its highest since June 8 at $1,288.92 an ounce.

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

Asian equity markets extended a global slide on Friday, sending investors fleeing to less risky assets such the yen, the Swiss franc and U.S. Treasuries.

The CBOE Volatility Index, the most widely followed barometer of expected near-term USA stock market volatility, hit its highest mark since November 8, when Trump was elected president.

"I think with gold prices, we still have to be cautious".

"A quick unwinding of prices to below $1,250 an ounce is very possible, especially if the tensions ease quickly and if global growth continues performing the way it is, with most incoming economic data suggesting a rosy economic outlook".

Gold has risen to its highest level in nearly two months, while the Swiss franc has powered against the U.S. dollar and seen its biggest one-day gain against the euro in more than two and a half years.

The Korean won also continued to skid, down 0.45 percent to 1,147.2, falling below its 200-day moving average for the first time in a month. This week has seen its biggest rise since June 2016.

Platinum climbed 1.1% to $987 per ounce after touching $991.50, its highest since March 6.

Benchmark 10-year notes last rose 7/32 in price to yield 2.1888 percent, from 2.211 percent late on Thursday.

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