Tuesday 21 November 2017

Markets dented by North Korea tensions

Foreign currency dealers work in a dealing room of KEB Hana Bank in Seoul, South Korea
Foreign currency dealers work in a dealing room of KEB Hana Bank in Seoul, South Korea

Gretchen Friemann

Escalating fears over North Korea's nuclear capabilities helped drive up demand for safe haven assets yesterday as markets reacted to the rogue nation's claims it had developed and tested an advanced hydrogen bomb capable of being mounted on a long-range missile.

But the flight to safety was relatively muted with benchmark German bond yields dipping to recent two-month lows while the Japanese Yen and gold prices rose. Stocks fell marginally too with London's main bourse the FTSE 100 edging into the red along with the pan European Stoxx Europe 600 index, which closed .5pc lower at 374.20.

Yet even as North Korea's sabre-rattling showed little sign of abating amid dire warnings from the US, Davy's global strategist, Donal O'Mahony, argued markets had dismissed the latest elevation in tensions "as noise".

While Wall Street was closed for the Labour Day holiday, Mr O'Mahony pointed out markets are unable to hedge for the "miniscule risk" the Korean crisis turns into nuclear war. "So the best option is just to ignore it ... If this was a legitimate flight to safety you'd see a lot weaker equity markets and lower bond yields.

Merrion Capital's chief economist, Alan McQuaid pointed out US bond yields have slumped to their lowest level since Donald Trump was elected after North Korea fired a missile over Japan last month.

But he claimed the mounting geo-political uncertainties were adding to jitters ahead of Thursday's meeting of the ECB.

Irish Independent

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