Business World

Sunday 18 February 2018

Stocks dip, gold gain after North Korea test

An employee of a foreign exchange trading company works near monitors showing TV news on North Korea's nuclear test (R) in Tokyo, Japan
An employee of a foreign exchange trading company works near monitors showing TV news on North Korea's nuclear test (R) in Tokyo, Japan

Patrick Graham

Stocks and the dollar fell yesterday while the Japanese yen, gold and sovereign bonds rose after North Korea's most powerful nuclear test to date dampened investor appetite for risk.

Sunday's test, and reports from Seoul that Pyongyang was preparing for another missile launch, sparked warnings from Washington DC and drove South Korea's stock market 1.2pc lower. Japan's Nikkei lost almost 1pc.

With Wall Street closed for the Labor Day holiday at the start of a week likely to become increasingly dominated by a number of central bank meetings, the fall in European stocks was less marked. The pan-European STOXX 600 index lost 0.4pc, led by a 0.7pc fall in banks.

"The markets' reaction seems similar to when missile launches have taken place in the past. Investors sell stock, rush to safe havens, assess the situation, and then buy the dips as tension eases," said Hussein Sayed, chief market strategist at brokers FXTM.

The dollar - down 0.3pc against the basket of currencies used to measure its broader strength - fell 0.6pc to 109.60 yen, having been as low as 109.22 and off a whole yen from late on Friday.

Investors tend to buy the yen in time of political or market tension on expectations Japanese investors will over time repatriate their money. The Swiss franc, also viewed as a safe place to park money, rose 0.8pc to 0.9579 per dollar.

Driven by the Korean losses, MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.7pc. Yields on German government bonds, regarded as among the world's lowest-risk assets, fell slightly. Benchmark 10-year yields were down one basis point at 0.37pc while two-year yields dipped a similar amount. (Reuters)

Irish Independent

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