Stocks drop, havens rally on N Korea fears

Bloomberg

Stocks slumped across Europe and Asia and havens including gold jumped after North Korea fired a ballistic missile over Japan, rattling markets from London to Sydney. Gasoline climbed as energy companies braced for another hit from Tropical Storm Harvey.
As equities retreated, volatility rose and bonds gained in classic risk-off moves. US stock futures also tumbled, Treasuries jumped and the dollar weakened. Gold surged to the highest this year, while the Swiss franc and the yen were the best-performing major currencies. The euro climbed above $1.20 for the first time since 2015, adding yet another headwind for the region’s stocks. Gasoline headed for a sixth day of advances as Harvey picked up strength again after inundating refineries along the Texas coast.
Japan called Kim Jong Un’s latest provocation an “unprecedented, grave and serious threat,” and asked the United Nations Security Council to hold an emergency meeting, while President Donald Trump said the US will consider “ all options” in the its response. The missile seems likely to reignite the simmering tension between North Korea and the US just days after Secretary of State Rex Tillerson praised the nation for its “restraint.”
“Some observers had thought
the US and North Korea were pursuing discussions behind closed doors, but it turns out North Korea continues to pursue missile development,” said Chihiro Ohta, a Tokyo-based senior strategist at SMBC Nikko Securities. “The risk-off stance is likely to continue even if the US responds calmly.”
The US Conference Board releases its monthly consumer confidence index for August. Inflation data from the euro zone’s largest economies this week may show prices nudged up in August. Japan releases figures for the industry on Wednesday. Australia is due to publish data on Wednesday detailing construction work done.
The US updates second-quarter GDP and core price data on Wednesday, and reports on August payrolls on Friday.
The Stoxx Europe 600 Index decreased 1.4 percent as of 8:33 a.m. in New York, the lowest in almost seven months. The UK’s FTSE 100 Index declined 1.1 percent on the biggest drop in almost three weeks on a closing basis. Germany’s DAX Index decreased 1.9 percent to the lowest in six months. Futures on the S&P 500 Index fell 0.6 percent on the biggest fall in more than a week.
The Bloomberg Dollar Spot Index dipped 0.4 percent to the lowest in more than two years. The euro gained 0.6 percent to $1.2051, the strongest in almost three years. The British pound climbed 0.2 percent to $1.2965, the strongest in more than two weeks. The Swiss franc gained 1.1 percent to $0.9446, the strongest in about two years.
The yield on 10-year Treasuries declined six basis points to 2.09 percent, the lowest in almost 10 months. Germany’s 10-year yield decreased five basis points to 0.33 percent, the lowest in two months. Britain’s 10-year yield dipped six basis points to 0.989 percent, the lowest in almost 11 weeks.
West Texas Intermediate crude climbed 0.2 percent to $46.67 a barrel. Gold increased 1.2 percent to $1,323.51 an ounce, the strongest in 11 months. Gasoline for September delivery rose 1.3 percent to $1.7347 a gallon after climbing 2.7 percent on Monday.
Japan’s Topix index closed 0.2 percent lower after falling as much as 0.7 percent, while South Korea’s Kospi index lost 0.2 percent, paring a drop of as much as 1.6 percent. The S&P/ASX 200 Index in Sydney declined 0.7 percent. Hong Kong’s Hang Seng Index fell 0.4 percent, while the Shanghai Composite Index fluctuated before edging higher. Thailand’s SET Index bucked the main trend, rising 1.8 percent. Concern about political violence has eased, according to CLSA. The yen advanced 0.7 percent to 108.50 per dollar. The won weakened the most in two weeks.