'Fire and fury' threat to North Korea comment 'wasn't tough enough'

Saturday, 12 Aug, 2017

Utilities eked out a small gain.

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 losses have been triggered by a standoff between Washington and Pyongyang, as the war of words between the two intensified.

The benchmark S&P 500 index tumbled more than 1% on Thursday, only the third time this year it has fallen that much, while the Nasdaq shed more than 2%. The index - which last week hit 22,000 for the first time - closed at 21,844.

The rhetoric, which began late Tuesday and continued into Friday, cracked the calm that has enveloped the market for months and interrupted stocks' march higher.

Selling was broad. Declining issues outnumbered advancing ones on the NYSE 6-to-1; on Nasdaq, a 3.60-to-1 ratio favoured decliners. All the indexes are down for the week.

The benchmark USA yield on Thursday was just above 2.2%, at its lowest level since late June, as investors bought up Treasuries, a classic safe harbour.

Volatility jumped and the pan-European STOXX 600 fell 1.1 percent, taking weekly losses to 2.8 percent, its worst since early November 2016. North Korea also laid out detailed plans of how it would launch a missile strike on US military bases in Guam (http://www.marketwatch.com/story/north-korea-details-plan-to-fire-missiles-toward-guam-says-only-absolute-force-will-work-with-trump-2017-08-09). Later, speaking to reporters, President Donald Trump demanded that North Korea "get their act together" or face extraordinary trouble.

The CBOE Volatility Index, the most widely followed barometer of expected near-term USA stock market volatility, hit its highest mark since November 8, when Trump was elected president. That's the biggest increase since May.

"Investors tend to be more cautious ahead of economic data, especially when the prices are high".

Tension between the two countries usually heightens around this time of the year as the U.S. conducts a series of military exercises jointly with South Korea, which the North views as direct intimidation - but nothing as bellicose as this.

When Iraq invaded Kuwait 27 years ago this month, the S&P 500 fell 1.1 percent, and was down 9.3 percent 20 days later. Of those, 52 percent delivered earnings and revenue that beat financial analysts' forecasts, according to S&P Global Market Intelligence. It was the biggest percentage loss since mid-June.

Travel companies Priceline.com and TripAdvisor also weighed on markets, with shares falling more than 7%.

Nevsun Resources Ltd offset some of the material group's gains, plunging 16.4 percent to C$2.75 after the company reported disappointing quarterly results. The stock lost $2.97 to $8.87.

MARKETS OVERSEAS: In Europe, Germany's DAX fell 1.1 percent, while France's CAC 40 slid 1.4 percent.

Oil prices closed lower after an early rally faded.

"Despite Brent Crude (oil) pushing above $53 per barrel.there was a sea of red in the commodity sector", said analyst Connor Campbell from Spreadex.