Global Markets Slip on North Korea Threats
September 26 2017 - 4:10AM
Dow Jones News
By Marina Force and Kenan Machado
Global stock markets were broadly lower Tuesday, following fresh
threats from North Korea and weakness in technology and health care
shares.
The Stoxx Europe 600 was down 0.1% in early morning trade, led
by losses in the tech sector. Asia stocks were also lower amid a
pullback in shares of tech firms.
North Korea tensions escalated Monday, after the foreign
minister warned that his country would shoot down U.S. warplanes
even if they were outside the nation's airspace. In the U.S., the
White House dismissed assertions about war and the Pentagon brushed
off the military threat.
The war of words between North Korea and the U.S. has pressured
major indexes and sent haven assets like gold higher a few times
since summer.
"Markets do get jolted by these things," said Sat Duhra, a
portfolio manager at Janus Henderson Investors, referring to the
escalating military tensions. "The impact is on equity risk premium
and on sentiment really," he said.
Investor sentiment was already bearish, given the Federal
Reserve's plans to shrink its balance sheet which should lead to
tighter liquidity, analysts said.
Haven assets had a muted reaction to the latest comments from
North Korea. Gold prices and the Japanese yen, which tends to rise
when markets stutter, were flat, while the Swiss franc lost
0.3%.
Central bank speeches will share center stage with geopolitical
tensions this week, with Federal Reserve Chairwoman Janet Yellen
scheduled to talk in Cleveland later Tuesday and Fed Vice Chairman
Stanley Fischer speaking Thursday.
Investors are hoping for monetary guidance from the Fed, which
last week hinted it would raise rates once more this year. However,
many traders were skeptical the Fed would provide any clarity.
"I don't think there is going to be an a-ha moment for the
markets after any of the speeches. They [Fed members] tend to move
back and forth between hawkish and dovish, in terms of their
language at least," said Mark Heppenstall, chief investment officer
at Penn Mutual Asset Management.
Federal-funds futures, used by investors to place bets on the
Fed's rate-policy outlook, showed Monday a 72.8% chance of a rate
increase by December, according to CME Group data.
In the bond market, the 10-year German government bond yield
rose to 0.404%, from 0.395% Monday. The 10-year Treasury yield also
moved higher to trade at 2.222%, compared with Monday's close of
2.220%. Yields rise when prices fall.
Meanwhile, Brent crude was down 0.6% to trade at $58.09 a
barrel, after hitting its highest level in more than two years
Monday, amid a growing market consensus that the OPEC-led deal with
major producers limiting output will be extended.
In Asia, South Korea's Kospi was down 0.3%, with Samsung
Electronics off 3.5 %. Hong Kong's Hang Seng Index fell 0.1%,
dragged down by the underperformance of the heavyweight Tencent
Holdings, which fell as much as 3.8% earlier, but pared some if its
losses to trade down 1.5%.
Elsewhere, Japan's Nikkei Stock Average moved 0.3% lower, with
tech stocks also facing selling pressure. Sony Corp. and Nintendo
Co. were down 2% and 1.9%, respectively.
Futures pointed to a 0.1% opening loss for both the S&P 500
and the Dow Jones Industrial Average, after Wall Street closed
lower on Monday with technology stocks under pressure.
Write to Marina Force at marina.force@dowjones.com and Kenan
Machado at kenan.machado@wsj.com
(END) Dow Jones Newswires
September 26, 2017 03:55 ET (07:55 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.