North Korean Threats Rattle Global Markets -- Update
September 22 2017 - 5:14AM
Dow Jones News
By Georgi Kantchev
Global markets slipped Friday after fresh threats from North
Korea revived the geopolitical fears that engulfed markets earlier
this month.
The Stoxx Europe 600 fell 0.2% in early trading, dragged down by
falls in the financial and resources sectors. Bourses across Asia
were also flashing red. On Wall Street, futures pointed to a 0.2%
opening loss for the S&P 500.
North Korean Foreign Minister Ri Yong Ho said late Thursday in
New York that the country may consider a nuclear test of
"unprecedented scale" in the Pacific Ocean.
Those comments came after North Korean leader Kim Jong Un said
he was considering the "highest level of hard-line countermeasure"
in response to President Donald Trump's warning that the U.S. would
annihilate North Korea if forced to defend itself or its
allies.
This was likely causing investors to be "antsy heading into the
weekend, " said Emmanuel Ng, an analyst at OCBC Bank.
Havens got a boost following the North Korean threats. The
Japanese yen and the Swiss franc both advanced against the dollar,
by 0.4% and 0.2% respectively, and gold rose 0.4%.
The geopolitical tensions overshadowed investors' focus this
week on the Federal Reserve's next moves. The central bank
suggested Wednesday that it was open to the possibility of an
interest-rate increase in December.
Weak inflation numbers in recent months had made some investors
skeptical the Fed would raise rates again in 2017. But after the
Fed meeting Wednesday, investors now see a 75% chance of a rate
rise by the end of the year, according to Fed-fund futures tracked
by CME Group.
For next year, the market expects one more interest-rate
increase, while the Fed reaffirmed Wednesday that it foresees three
rate rises.
"The market is still way behind the Fed and is underpricing its
next moves," said Mike Bell, global market strategist at J.P.
Morgan Asset Management.
On Friday, 10-year Treasury yields were down at 2.259%, from
2.278% on Thursday, with yields moving inversely to prices. The WSJ
Dollar Index, which tracks the dollar against a basket of 16
currencies, was down 0.3%.
Investors were also looking to a key speech on Brexit by U.K.
Prime Minister Theresa May on Friday, in which she is expected to
set out her vision for Britain's future relationship with the
European Union after it leaves the bloc in 2019.
The British pound was up 0.1% against the dollar at $1.359.
Sterling had strengthened earlier this month after the Bank of
England signaled it might raise interest rates as soon as
November.
On Sunday, Germany votes in federal elections. Polls suggest
that Chancellor Angela Merkel's Christian Democratic Union party is
likely to win enough votes to give her a fourth term.
In Japan, gains in the yen sent the Nikkei Stock Average down
0.3% as a stronger currency would hurt the country's key export
stocks. Hong Kong's Hang Seng was down 0.8%, while in South Korea
the Kospi fell 0.7%.
Chinese shares were broadly down after rating firm Standard
& Poor's on Thursday downgraded the country's sovereign credit
rating due to risks associated with its increasing debt. The
Shanghai Composite Index was off 0.2%, while the Shenzhen benchmark
was down 0.3%.
In commodities, Brent crude rose 0.2% to $56.21 a barrel ahead
of a meeting by members of the Organization of the Petroleum
Exporting Countries on Friday.
Lucy Craymer contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
(END) Dow Jones Newswires
September 22, 2017 04:59 ET (08:59 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.