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29 August 2017
 |
| Japan financial markets (The Total Investment & Insurance Solutions) |
Global stock markets and the dollar fell sharply Tuesday, as investors
were rattled by North Korea's launch of a midrange ballistic missile that
crossed over northern Japan and fell into the Pacific Ocean. The euro, which
breached $1.20 for the first time since January 2015, was one of the major
beneficiaries of the risk-averse mood across financial markets. The Total Investment & Insurance
Solutions
KEEPING SCORE: In Europe, France's CAC 40 fell 1.3 percent to 5,011
while Germany's DAX slid 1.8 percent to 11,911. The FTSE 100 index of leading
British shares was 1.2 percent lower at 7,314. U.S. stocks were poised for
declines at the open with Dow futures and the broader S&P 500 futures down
0.6 percent. The dollar was also suffering from the risk averse mood in the
markets, posting big falls against its major competitors.
MISSILE NEWS: The reason behind the risk-off mood in stock markets was
the news overnight that North Korea had fired a midrange ballistic missile into
the northern Pacific Ocean. South Korea's Joint Chiefs of Staff said the
missile traveled around 2,700 kilometers (1,677 miles) and reached a maximum
height of 550 kilometers (341 miles) as it traveled over the northern Japanese
island of Hokkaido. The distance and type of missile tested seemed designed to
show that North Korea can back up a threat to target the U.S. territory of
Guam, if it chooses to do so, while also establishing a potentially dangerous
precedent that could see future missiles flying over Japan.
ANALYST TAKE: "Equities are firmly in the red after North Korea
delivered its biggest provocation in two decades by firing a ballistic missile
over Japan, adding fuel to the fires of geopolitical uncertainty," said
Mike van Dulken, head of research at Accendo Markets. The Total Investment & Insurance Solutions
SAFE HAVENS: While stocks were suffering, traditional safe haven assets
were in demand, including gold, which was up 0.8 percent at $1,325.30 an ounce.
The Swiss franc was also in the ascendant, with the dollar down 1.2 percent at
0.9442 SFr. The Total Investment &
Insurance Solutions
EURO STRONG TOO: Europe's single currency also enjoyed further solid
gains amid the geopolitical uncertainty, rising above $1.20 for the first time
since early 2015. The euro has be buoyant for a while now, benefiting from the
stronger than anticipated economic recovery taking place in the 19-country
eurozone as well as rising expectations that the European Central Bank will
start to rein in its stimulus measures soon. Last Friday, the ECB's president,
Mario Draghi, failed to engage in any talk about the strong euro, which could
hurt exporters and prevent inflation from rising back to target as it keeps
import costs down. Investors took that as a signal for further euro buying. By
early afternoon London time, the euro was up 0.5 percent at $1.2042.
ASIA'S DAY: Asian investors largely held their nerve after the North
Korea test, with Japan's benchmark Nikkei 225 closing down only 0.5 percent at
19,362.55. The Japanese yen was holding up well too as it often does in times
of geopolitical stress — the dollar was down 0.7 percent at 108.49 yen.
Elsewhere in Asia, Australia's S&P/ASX 200 dipped 0.7 percent to 5,669.00
while South Korea's Kospi lost 0.2 percent to 2,364.74. Hong Kong's Hang Seng
shed 0.1 percent to 27,828.67, but the Shanghai Composite inched up 0.1 percent
to 3,365.23.
STORM FEARS: U.S. trading had focused on the effects of Tropical Storm
Harvey in the absence of other market-moving news. Large parts of the energy
and petrochemical industries are based in the Houston area and companies with a
lot of stores in the area stand to lose business. While gas price spikes will
be temporary, other effects of the storm will last for years. The U.S. Federal
Reserve might hesitate to raise interest rates if they think the storm will
slow the economy significantly. The
Total Investment & Insurance Solutions
ENERGY: Benchmark U.S. crude was down 4 cents at $46.53 a barrel, while
Brent crude, the international standard, fell 20 cents to $51.22 a barrel.The Total Investment & Insurance
Solutions
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