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Shares hit by US-North Korea tensions

12 August 2017

The Dow Jones Industrial Average rose 22 points, or 0.1%, to 21,867, while the S&P 500 was up 3 points to 2,440, a rise of 0.1%.

Currently, the major averages remain in positive territory but off their best levels of the day.

The strength on Wall Street is partly due to bargain hunting, with traders picking up stocks at reduced levels following the pullback seen over the past few sessions.

Markets are now awaiting USA consumer price data for July, due later today.

The euro was down 0.4 per cent at just over $1.17 and nearing a two-week low, while the New Zealand dollar tumbled a full one per cent as its central bank head bluntly said he wanted it lower.

Excluding food and energy prices, core consumer prices still crept up by 0.1% in July, matching the increases seen in the three previous months. Both the core and headline rates are expected to have risen by 0.2 percent during July.

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"There is a continuation of flight to the safe havens after remarks on Thursday evening from Trump about North Korea", said Quantitative Commodity Research consultant Peter Fertig.

"While not necessary unexpected - as the USA had to respond to threats made by North Korea that they will fire rockets due to land just off the coast of Guam soon - new comments by Trump propelled stocks lower".

Trump continued to ramp up the rhetoric with a post on Twitter this morning indicating that the U.S. is prepared to take military action against North Korea. He told reporters in the late afternoon that he hoped North Korea "fully" understood the gravity of his warning about taking military action against the United States or its allies.

Trump took specific aim at North Korean leader Kim Jong Un, saying, he had "disrespected our country greatly", and would not be "getting away with it". Since the beginning of 2017, the barometer index of the S&P 500 had only two sessions of declines of 1 % or more.

A Reuters Datastream index of more than 7,000 stocks across the globe saw its market capitalisation drop from a record high US$61.36 trillion on Monday to US$60.43 trillion at the close on Thursday. They were at 2.201 percent on Friday.

USA stock futures were pointing to a weaker open on Friday. Autodesk (ADSK) and Red Hat (RHT) posted notable gains.

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Market participants are also nervous about escalating tensions between the USA and North Korea.

The selling was spread across the region led by Hong Kong's Hang Seng (-1.9 per cent) with Korea's Kopsi (-1.6 per cent) and Shanghai (-1.4per cent) not far behind.

MSCI's broadest index of Asia-Pacific shares outside Japan skidded 1.55%, its biggest one-day loss since mid-December.

Bond prices rose. The yield on the 10-year Treasury note slipped to 2.19 percent from 2.20 percent late Thursday.

"The uncertainty surrounding the situation has been the main driver of the markets recently".

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Shares hit by US-North Korea tensions