US stocks fall the most in six weeks


Escalated tension on Korean peninsula knocks financial markets out of August doldrums
Chief Investment Office11 Aug 2017
Photo credit: AFP Photo


US

The escalated tension on the Korean peninsula has knocked financial markets out of the August doldrums.

US stocks fell the most in six weeks, halting a 15-day string without a move that exceeded 0.3%, and the Chicago Board Option Exchange Volatility Index spiked 40% higher as American allies warned North Korea against firing missiles toward Guam. Gold surged to a nine-week high, the yen advanced and Treasuries strengthened as investors sought haven assets. The dollar took a cue from data that signalled inflation will remain tame.

The S&P 500 Index lost 1.45% to 2,438.21, the steepest slide since 29 June. The Dow Jones Industrial Average slumped 0.93% to 21,844.01 and the Nasdaq Composite Index posted a steep 2.13% loss to 6,216.87.

Friday’s (11 August) consumer price index (CPI) data in the US will get close attention following an unexpected drop in wholesale prices in July. New York Fed President William Dudley cautioned that it will "take some time" for inflation to reach the central bank’s 2% target, the latest official warning that price pressures remain muted. The producer price index (PPI) fell 0.1% last month, the first decrease in almost a year. – Bloomberg News.

EUROPE

European equities fell for a second day to close at the lowest level since March as geopolitical tensions between North Korea and the US persisted.

The Stoxx Europe 600 Index fell 1.00% to 376.05 at the close. The benchmark slid 0.7% Thursday (10 August), joining a global selloff, after US President Donald Trump heightened his rhetoric against the regime of Kim Jong Un to an unprecedented level. The VStoxx Index of euro-area volatility gained 26%, after a 17% jump the previous day.

All 19 industry groups fell. Banks retreated the most in more than three weeks. Basic resources firms widened a two-day loss to 2.1%. Glencore Plc helped lead a gauge of miners to the biggest decline among industry groups. The world’s largest commodities-trading house lost 2.02% after reporting first-half earnings that trailed estimates. Galapagos NV jumped 8.30% after saying its drug halted disease progression in a trial of patients with idiopathic pulmonary fibrosis. – Bloomberg News.

JAPAN

Markets in Tokyo are closed today (11 August) for the Mountain Day public holiday. Trading will resume Monday (14 August).

Shares in Tokyo Japanese equities paused on Thursday (10 August) after American officials attempted to soothe fears that an armed conflict between the US and North Korea was imminent. The Nikkei 225 index and Topix index were flat at 19,729.74 and 1,617.25, respectively. Around half of the Nikkei’s sectors ended in negative territory, with losses led by financials (-0.86%). Energy stocks surged 2.17% following reports that US crude inventories declined by more than expected.

Meanwhile, Toshiba Corporation’s auditors signed off on its full-year earnings, offering some temporary relief as the Japanese company struggles to stabilise after an accounting scandal, massive writedowns, and a legal spat that threatens to delay the sale of its chips business. The industrial and consumer electronics maker reported a JPY965.7b (USD8.8b) net loss for the year ended 31 March 2017, it said in a statement. That compares with a JPY977.4 b loss average of analysts’ estimates and the Tokyo-based company’s own outlook of as much as JPY1.01t. Toshiba’s shares rose for a fourth day, by 0.69%. – Bloomberg News.

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