US stocks fall despite fading threat of war with N Korea

Bloomberg

The dollar rallied and U.S. stocks nudged lower amid a receding threat of war with North Korea. Treasuries extended losses and the dollar rallied after US retail sales exceeded forecasts last month, boosting speculation the Federal Reserve might lift interest rates again this year.
S&P index futures also gained after the data, while traditional havens including gold and the yen slumped as the threat of war over North Korea receded. The Stoxx Europe 600 Index edged higher after the German economy extended its growth spurt in the second quarter, albeit at a slower pace than expected. The British pound tumbled to a five-week low after UK inflation unexpectedly held steady in July, clouding the outlook for rate increases, while oil extended a slide to below $48 a barrel.
Retail sales in the world’s biggest economy advanced by the most this year in July, bolstering the case for more policy tightening. Federal Reserve Bank of New York chief William Dudley earlier said he
favored another rate hike in 2017.
Meanwhile, Japan’s currency — a haven in times of global tension — slumped after the Wall Street Journal characterized a North Korean media report as indicating that dictator Kim Jong Un had decided not to launch a threatened missile attack on Guam. The report, from KCNA on Tuesday, said Kim praised the military for drawing up a “careful plan” to fire missiles toward Guam. Kim was cited by KCNA saying he would watch the US’s conduct “a little more.”
And in Germany, data showed the economy expanded 0.6 percent in the second quarter, driven by domestic demand. That missed estimates slightly, but was accompanied by a revision in the first-quarter number. The euro retreated.
On Wednesday, the Federal Open Market Committee will issue minutes from its July policy meeting that may hold clues to the Federal Reserve’s next rate hike. The same day, euro-area second-quarter GDP data is due. Chinese tech titans Tencent Holdings Ltd. and Alibaba Group Holding Ltd. are among the companies reporting results this week.
The Stoxx Europe 600 Index increased 0.3 percent as of 8:35 a.m. in New York. Futures on the S&P 500 Index climbed 0.3 percent. The MSCI All-Country World Index declined 0.1 percent. Germany’s DAX Index jumped 0.5 percent to the highest in a week on a closing basis. The UK’s FTSE 100 Index surged 0.5 percent.
The euro fell 0.7 percent to $1.1699, the weakest in almost three weeks. The Bloomberg Dollar Spot Index jumped 0.6 percent, the biggest increase in almost seven months. The British pound dipped 0.8 percent to $1.2856, the weakest in five weeks.
The yield on 10-year Treasuries climbed six basis points to 2.27 percent, the highest in more than two weeks. Germany’s 10-year yield advanced four basis points to 0.45 percent, the highest in a week. Britain’s 10-year yield gained four basis points to 1.108 percent.
Gold declined 1 percent to $1,269.24 an ounce, the biggest drop in more than five weeks. West Texas Intermediate crude declined 0.7 percent to $47.26 a barrel, the lowest in more than three weeks.
Japan’s Topix index finished the day 1.1 percent higher and Australia’s S&P/ASX 200 Index gained 0.5 percent at the close. Hong Kong’s Hang Seng index dropped 0.3 percent as the Shanghai Composite Index rose 0.4 percent. Markets in South Korea and India are closed Tuesday for holidays.