Published: Sat, August 12, 2017
Industry | By Dora Warner

Global shares mostly lower on rising unease over North Korea

Global shares mostly lower on rising unease over North Korea

"What has changed this time is that the scary threats and war of words between the USA and North Korea have intensified to the point that markets can't ignore it", said Shane Oliver, head of investment strategy at AMP Capital in Sydney.

The dollar weakened after news that USA producer prices unexpectedly fell in July, recording their biggest drop in almost a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase. UBS said in a note it had increased its long position in gold as forward real interest rates declined and commodity prices increased, while it also added to longs in the platinum group metals as investment demand rose.

Emerging market stocks lost 1.27 percent.

The Korean won also continued to fall, down 0.45 percent to 1,147.2.

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.

Cracks are showing in what has been a virtually non-stop USA equity rally after a rapid escalation of tension between North Korea and the United States this week.

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Gains among technology companies helped snap a three-day losing streak for US stocks Friday, though the market ended with its worst weekly loss since March.

The S&P 500 dropped 1.4% to 2438.21, while the Dow Jones Industrial Average fell 204.69 points, or 0.9%, to 21,844.01.

JITTERS: With President Donald Trump warning North Korea of "fire and fury", investors have become concerned that the war of words between Washington and Pyongyang could spiral out of control. That lifted the year-on-year increase in the CPI to 1.7% from 1.6% in June. The stock has more than doubled over the past 12 months, gaining more than 160%.

They suggest the USA and China, a North Korean ally, could work together to de-escalate the situation. They were at 2.201 percent on Friday. They are looking for confirmation that the Fed is sticking with plans for a possible December interest rate hike.

J.C. Penney Co. (JCP) slumped 17% after it reported a wider-than-expected second-quarter loss (http://www.marketwatch.com/story/jc-penney-shares-sink-after-losses-exceed-expectations-2017-08-11). The yeild on the benchmark 10-year Treasury yields fell as low as 2.197 percent overnight, their lowest level since June 28.

United States crude rose 0.41 per cent to US$48.79 per barrel and Brent was last at US$52.01, up 0.21 per cent.

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Equity markets had traded with a soft tone in Europe and there was a sharp increase in selling pressure in NY with the S&P 500 index declining by close to 1.0%.

The Japanese yen last strengthened 0.03 per cent versus the greenback at 109.22 per dollar. The September copper contract was down two cents to US$2.91 a pound.

The euro held steady at $1.1776. MSCI's broadest index of Asia-Pacific shares outside Japan .miapj0000pus closed 1.37 percent lower. Trading was thinner than usual, with Japanese markets closed for a public holiday.

It is "a bullish sign that the equity markets are rebounding somewhat on a Friday, in spite of the fact that investors will need to wait for two days to react to any geopolitical news that comes out over the weekend", said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas.

South Korea's KOSPI fell 1.7 per cent on Friday to its lowest since May 24, but its losses for the week were a relatively modest 3.2 per cent.

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