Published: Sat, August 12, 2017
Markets | By Noel Gibbs

Geopolitical Concerns Lead To Sell-Off On Wall Street

Geopolitical Concerns Lead To Sell-Off On Wall Street

US President Donald Trump's emotive suggestion about a large scale military response to North Korean threats rattled markets, also dragging the FTSE down 0.8% on Wednesday.

The stock exchanges in NY saw tiny losses at the end of trading on Tuesday, while Dow-Jones Index and S & P 500 earlier notched new records.

Chinese stocks seemed little affected though, and Australian stocks rose Wednesday after a weaker Tuesday amid strong earnings reports from big banks.

In commodity markets, oil prices fell despite lower USA inventories data.

While European stocks have seen robust inflows in the wake of the French elections, their performance have lagged their USA rivals since mid June. The broad-based S&P 500 dropped 0.2 percent to 2474.92 points, and the Nasdaq dropped 0.2 percent to 6370.46 points.

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MSCI's gauge of stocks across the globe shed 0.77 percent, on track for its third straight day of declines as it pulled further back from all-time highs.

Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, said: "While the tough talk about the potential for war (between the United States and North Korea) is scary, investors have heard it many times before".

But he said that investors remained wary of events that could spike volatility in the foreign exchange market on the holiday Friday.

While gold XAU= , a safe-haven favourite, pared some gains it was last up 1.2 per cent at around its highest since mid-June, while the Swiss franc CHF= and the Japanese yen JPY= also rose.

Investors' unease over escalating tensions between the US and North Korea had weighed on stocks earlier in the day, pushing gold and bond prices slightly higher.

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Investors fled to gold on Wednesday as tensions between North Korea and the USA escalated, pushing the precious metal's price to an intraday high of $1276.2/oz. The Dow Jones industrial average slid 36.64 points, or 0.2 percent, to 22,048.70.

"It is a market that is beginning to encounter some major threats and of course the threat is geopolitical", said Peter Cardillo, chief market economist at First Standard Financial.

Asian markets closed mixed: Tokyo's Nikkei fell 0.3 per cent, Hong Kong's Hang Seng added 0.6 per cent, and China's Shanghai Composite firmed 0.1 per cent up.

Meanwhile, gold stocks bucked the downtrend, driving the NYSE Arca Gold Bugs Index up by 1.3%. The September copper contract was down two cents to US$2.91 a pound. U.S. gold futures for December delivery rose 0.2 percent to $1,291.80 per ounce. Brent crude, used to price global oils, added 26 cents to $52.96.

Investors opted for the perceived safety of US Treasuries, which pushed the yield on the 10-year note three basis points lower to 2.21 percent.

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CURRENCIES: The dollar slipped to 110.00 yen from 110.06 late Wednesday in Asia.

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