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Markets Right Now: US stocks trade lower at midday

12 August 2017

On the economic front, the Labor Department released a report showing an unexpected drop in USA producer prices in the month of July. The risk-off tone triggered by the increase in tension between the United States and North Korea yesterday picked back up during today's U.S. session.

JJ Kinahan, chief strategist at TD Ameritrade, said geopolitics had "splashed cold water on the markets".

Brent crude, the global benchmark, was up 0.72% at $52.45 per barrel and US West Texas Intermediate (WTI) also gained, up 0.54% on the day at $49.48 per barrel.

U.S. President Donald Trump issued a new threat to North Korea, saying American weapons were "locked and loaded" as Pyongyang accused him of driving the Korean Peninsula to the brink of nuclear war.

The Dow and S&P 500 inched higher on the day but they both posted their largest weekly percentage drops since late March.

"There's not a great incentive to buy big". The September copper contract was down two cents to $2.91 a pound.

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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.

Markets in Italy, France and Germany also saw declines.

There were falls of almost 2% on South Korea's Kospi and Hong Kong's Hang Seng, with markets in mainland China and Australia also down - taking their cues from sharp losses on Wall Street earlier. Chinese blue chips closed flat but Hong Kong's Hang Seng Index fell 0.4%.

Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a sell-off, and the tensions over North Korea have proved the trigger. Earlier in the session, it marked its highest since June 8 at $1,288.92 an ounce.

The yen tends to benefit during times of geopolitical or financial stress as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors there will repatriate funds in a crisis. Shanghai Composite Index fell 0.7 percent to 3,238.53. The Korean won fell against the USA dollar.

"It reinforces market concerns that inflation is perhaps just not picking up in the way the Fed had been expecting", said Osborne.

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The local currency closed at 1,142.00 won against the USA dollar, down 6.80 won from the previous session's close.

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

The dollar widened losses against the yen to hit a two-month low.

According to forex dealers, losses in domestic equity markets also influenced the rupee.

The selling in the USA extended to global markets Friday.

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%. "Indeed, the biggest increases in the price of gold have occurred when the USA bombed Libya in 1986, in the wake of the Gulf War in 1990, and, more recently, when ISIS attacks put oil supplies in the Middle East at risk". Brent crude was up 80 cents at $53.50 a barrel and USA crude was up 60 cents and back up to $50.

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Markets Right Now: US stocks trade lower at midday