Published: Wed, August 16, 2017
Economy | By Melissa Porter

Markets steady as Korean fears ease

Markets steady as Korean fears ease

"Safe-haven currencies like the Swiss franc and Japanese yen [are] losing altitude as key volatility gauges normalize".

President Donald Trump issued a new threat to North Korea on Friday, saying the US military was "locked and loaded" as Pyongyang accused him of driving the Korean peninsula to the brink of nuclear war and world powers expressed alarm. BMO Capital Markets downgraded both companies to "market perform", saying prospects for a near-term settlement of the U.S.

"Chinese involvement in the recent spat between North Korea and the United States has been one of the biggest calming influences, highlighting that for the USA to go to war with North Korea it must first go through China", said analyst Joshua Mahony at IG, with China on Monday moving to implement an import ban on host of North Korean products.

ASIA'S DAY: Earlier, Asia bore the brunt of the mounting geopolitical uncertainty, with South Korea's Kospi index closing down 1.7 percent at 2,319.71 and Hong Kong's Hang Seng ending 2 percent lower at 26,883.51. Against a basket of major currencies, the US dollar rose 0.36 percent on the day but has fallen 8.6 percent so far this year.

The most influential movers on the index included Royal Bank of Canada, which rose 1.1 per cent to $93.54, and Bank of Nova Scotia, which advanced 1 per cent to $77.45.

The Dow Jones Industrial Average .DJI rose 10.03 points, or 0.05 percent, to 22,003.74, the S&P 500 .SPX gained 0.19 points, or 0.01 percent, to 2,466.03 and the Nasdaq Composite .IXIC added 0.93 points, or 0.01 percent, to 6,341.16.

Bond prices turned lower.

But Merck shares rose modestly, while the iShares Nasdaq Biotechnology ETF climbed 1%, in line with the rest of the market.

In an interview with The Associated Press, William Dudley, president of the Federal Reserve Bank of NY, said he thinks the Fed has adequately prepared investors for a reduction in the portfolio, which swelled after the 2008 financial crisis as the Fed bought bonds to reduce long-term rates. "This is not the last we are going to hear of this situation", said Justin Hoogendoorn, head of fixed income strategy and analytics at Piper Jaffray in Chicago. Brent crude, the global standard, shed $1.37, or 2.6 percent, to $50.73 a barrel in London.

The dollar rose to its highest level in almost three weeks against a basket of major currencies after the data. In a tweet, President Donald Trump warned of military action "should North Korea act unwisely", noting that the "locked and loaded".

The yield on Germany's 10-year government bond, the benchmark for the eurozone, was up 4.5 barrels a share to 0.43%, a move mirrored by most other eurozone debt. Data from Commodity Futures Trading Commission released on Friday showed speculators' net short bets on the dollar grew last week to their largest position since January 2013.

Oil prices held steady after Monday's heavy selloff, weighed by a strong USA dollar - which makes oil more expensive for overseas buyers - and signs of weaker demand in China, the world's second-largest consumer. It earlier touched its highest level since July 26.

Gold was out of favor on Monday after clocking a 2.46-per-cent jump last week.

Netflix shares were down 0.86 percent after Barron's reported on Saturday that the stock could drop by more than half by the end of the decade as Walt Disney plans its own streaming service and Amazon looms. Morgan Stanley fell 68 cents, or 1.5 percent, to $45.62.

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