North Korea nerves rattle stocks, lift gold, yen

North Korea nerves rattle stocks, lift gold, yen

Wall Street stocks posted their biggest declines in almost three months Thursday as President Donald Trump doubled down on his warnings to North Korea over its nuclear program.

The sell-off is likely to extend into the European session, with financial spread-better CMC Markets expecting Germany's DAX and France's CAC 40 to open down about 0.7% each and Britain's FTSE 100 to start 0.55% lower.

Investors flocked to gold Wednesday against the backdrop of rising tensions between the US and North Korea, offsetting some of the broad-based declines on the commodity-heavy Toronto stock index.

The index's losses mirrored global markets, which fell after incendiary words between the United States and North Korea.

The euro was down 0.3 percent at just over $1.17 and nearing a two-week low, while the New Zealand dollar tumbled a full 1 percent as its central bank head bluntly said he wanted it lower.

"It's just a classic risk-off day", said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in NY.

The last time the S&P closed down more than 1 percent was May 17 when it fell 1.8 percent.

The Chinese volatility gauge jumped by the most since January 2016 to its highest level in more than seven months.

Although Japan could be in the front line of any clash with North Korea, the yen is benefitting because Japan is the world's biggest creditor nation and Japanese investors tend to repatriate funds in times of stress, attracting other flows.

Currency traders consolidated positions in the Japanese yen and Swiss franc, and pushed up the dollar index by unwinding some of the recent bets on the euro.

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But "the yen may be expected to lose its safe-haven status if US-North Korean tensions continue to escalate", leaving the Swiss Franc, and possibly the US dollar, as the remaining beneficiaries of risk aversion, Emmanuel Ng, currency strategist at OCBC Bank in Singapore, wrote in a note.

The US dollar set an eight-week low against the yen after US President Donald Trump further ratcheted up the rhetoric, suggesting that his "fire and fury" comments may not have been tough enough. Hong Kong's Hang Seng Index plummeted 560.49 points or 2% to 26,883.51.

The pan-European FTSEurofirst 300 index lost 1.19 percent.

The dollar weakened after news that USA producer prices unexpectedly fell in July, recording their biggest drop in almost a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.

A report released by the Labor Department showed a modest uptick in consumer prices in the USA in the month of July.

European stocks have fallen for a third day on Friday and look headed for their worst week since early November a year ago, as US President Donald Trump's rhetoric on North Korea over the past few days made investors risk averse.

Spot gold prices were little changed at $1,286.05/oz, after touching a two-month high earlier.

Crude futures extended losses on fears of slowing demand and lingering concerns over a global oversupply meanwhile.

United States crude was down 0.9% at $48.16 a barrel, on track for a weekly loss of 2.9%.

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