Tensions over North Korea weigh on stocks but boost gold

Screen Shot 2017 08 10

CNN anchor Don Lemon left and former Director of National Intelligence James Clapper. CNN

President Donald Trump ratcheted up his rhetoric toward North Korea and its leader on Thursday, warning Pyongyang against attacking Guam or U.S. allies after it disclosed plans to fire missiles over Japan to land near the U.S. Pacific territory. Asian and European stocks continued the sharp decline Friday.

The S&P 500 dropped the most since May and MSCI's gauge of stocks across the globe lost 1.1 percent in its third straight day of declines, as it pulled further back from all-time highs.

The headlines about North Korea served as a spark to jolt investors out of complacency on the heels of an extended period of calm in the market, said McClellan who shared the following chart in a report.

"We're not very oversold yet so the market still has more downside left to it", said Robert Pavlik, chief market strategist at Boston Private Wealth in NY.

The decline in equity markets and a dip in United States bond yields triggered fresh demand for precious metals and gold pushed to fresh 2-month highs around $1,288.

The Dow Jones Industrial Average climbed 0.08% on Friday, Aug. 11, the S&P 500 gained 0.13%, and the Nasdaq added 0.64%.

"I do think I expect inflation to also start to move higher in the medium term but probably not get all the way back to 2-percent on a year-over-year basis, because, remember, we've had these very weak inflation readings for a number of month", Dudley said.

The yen is perceived as a safe haven because Japan is the world's biggest creditor country and investors there have tended to repatriate funds in times of crisis. Hong Kong's Hang Seng Index plunged by 2 percent, while South Korea's Kospi Index slumped by 1.7 percent.

"Given the speculative flows positioning for possible yen repatriation, we could see the psychologically significant 109.00 level give way", Stephen Innes, head of Asia Pacific trading at OANDA, wrote in a note.

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Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a selloff, and the tensions over North Korea proved to be the trigger.

Copper traded at $2.912, down 0.25%, while natural gas tacked on 0.23% to $2.991.

Possibly due to the lack of appetite for risk in the market, the euro suffered on Thursday, down slightly against the dollar by 0.09% at 1.1749, slipping towards a two week low.

The dollar was further weighed down on Friday by the soft U.S. inflation data.

The Nasdaq Composite .IXIC was down 68.30 points, or 1.08 percent, at 6,284.03.

U.S. Treasury long-dated yields dropped to six-week lows, pressured by U.S. The 30-year bond was last up 4/32 in price to yield 2.7871 per cent, from 2.794 per cent late on Thursday.

Gold, a classic safe haven asset, was trading at around $1,292 per ounce, up more than two percent this week and near a nine-week high. Its weekly gain of 2.6 per cent is the largest since June 2016.

Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in US crude inventories, leaving prices volatile. Brent crude, used to price global oils, gained 40 cents to $52.54 in London.

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