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Political tensions continue to weigh on world stocks

12 August 2017

Gold was up $3 at $1293 an ounce, adding to 2-month highs.

In Asia, the Japanese Nikkei 225 index closed down 0.1% on Friday. The VIX, a measure of how much volatility investors expect, jumped to its highest level since May.

-North Korea tensions and the weak data that further reduced expectations of a Fed rate hike in December. The Dow slumped by 1.1 percent, while the Nasdaq and the S&P 500 tumbled by 1.5 percent and 1.4 percent, respectively.

The US military's options are "locked and loaded", Trump said on Friday in a warning to North Korea if it chose to "act unwisely". The reclusive state raised the stakes further with a detailed plan to send a salvo of missiles towards the USA territory of Guam.

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The Nasdaq Composite Index plunged 2.1% to 6216.87 and the Standard & Poor's 500 Index dropped 1.45% to 2438.21.

The rise in geopolitical tensions this week, which heightened after U.S. President Donald Trump on Tuesday warned North Korea that it would face "fire and fury" if it threatened the United States, has drawn investor attention away from second-quarter corporate earnings season, which is winding down. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 2.3 basis points to 2.189 percent. Futures on the S&P 500 Index (SPX) and Nasdaq-100 Index (NDX) are lower, as well, in what could be a third straight loss for US stocks.

FED WATCH: Investors looked ahead to an appearance Thursday by Bill Dudley, president of the U.S. Federal Reserve Bank of NY, for signs of the Fed's outlook on the economy.

"Of course, this could end up being a flash in the pan, so we don't think that fund managers and traders are going to rush into changing their portfolio allocations just yet, they will want to see how things play out in the coming days".

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Despite the risk-off attitude in the market, stocks in NY were taking back some losses at the London equities close, as bargain hunters entered the market following steep falls in U.S. stock indices earlier this week. The euro fell to $1.1728 from $1.1757.

"Tensions are high. Markets have taken a little notice", said Greg McKenna, an analyst at AxiTrader. "What's happened in North Korea is enough to do that".

US crude rose 0.43 percent to $48.80 per barrel and Brent was last at $52.01, up 0.21 percent on the day.

The dollar slipped to as low as 109.11 yen in early Asian trade on Friday, its lowest level since June 14, when the greenback had fallen to as low as 108.81 yen. On commodities markets, oil advanced with USA crude nearing $50 a barrel after figures from industry group the American Petroleum Institute showed a sharp decrease in stockpiles, a clear indication of the easing supply glut.

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Political tensions continue to weigh on world stocks