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Global stocks, yen and gold fall as North Korea tensions ease

16 August 2017

In Europe, stock markets were making even bigger gains, with Germany's DAX up 1.1 percent at 12,148 and the CAC 40 in France 0.9 percent higher at 5,108.

The dollar index, which tracks the greenback against six rival currencies, edged higher after Dudley's comments and was up 0.03 percent to 93.577.

Gallo pointed to a raft of political and economic event risks - ranging from German elections to the expected start of the U.S. Federal Reserve's balance sheet wind-down - that move into view in September as reasons for investors to consolidate on anti-dollar plays.

Markets reacted poorly last week as tensions escalated between the US and the Asian dictatorship, which is developing nuclear weapons.

Global stocks, yen and gold fall as North Korea tensions ease
Global stocks, yen and gold fall as North Korea tensions ease

North Korea responded with a statement by its official KCNA news agency claiming Trump is "driving" the Korean peninsula to the "brink of a nuclear war". That prompted North Korea to say it was considering firing missiles at Guam, a USA -held Pacific island.

Mr Trump's remarks on Tuesday that North Korea would face "fire and fury like the world has never seen" pushed Wall Street lower, with only utilities making gains and drove the VIX "fear gauge" of expected volatility on the S&P 500 to its highest in nearly a month. Global benchmark Brent also fell 0.9 percent to $51.44, after Thursday's 1.5 percent drop.

Pyongyang said on Wednesday it was considering plans for a missile strike on the US Pacific territory of Guam, just hours after Trump said North Korea would face "fire and fury" if it threatens the United States, his strongest warning yet for North.

On Thursday, New York Fed President William Dudley said he expects sluggish US inflation to rise over the next several months while the hot labor market gets even hotter.

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The dollar index, which measures the US currency against a basket of major peers, slipped 0.1 per cent as US Treasury yields fell.

The dollar rose 0.3 percent to 109.52 yen, getting some respite after having fallen to as low as 108.72 yen on Friday, its lowest since April 19.

On the currency front, the USA dollar is trading at 109.74 yen compared to the 110.32 yen it fetched at the close of NY trading on Tuesday.

"European indices are following their Asian counterparts lower once more today, as the risk aversion seen over the past two days continues apace", said IG market analyst Joshua Mahony in a note.

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With Japanese second-quarter growth expanding 1 percent quarter-on-quarter, fueled by rising consumption and capital expenditure, investors stepped in to buy risky assets after tensions over North Korea.

Gold, another classic safe haven asset, was trading at around US$1,285 per ounce, up more than two percent this week and near a nine-week high.

Data on Friday showing a smaller-than-expected rise in USA consumer prices in July has added to doubts on whether the Fed would raise interest rates again this year, weighing on the dollar.

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Global stocks, yen and gold fall as North Korea tensions ease