Stocks, dollar extend slide as US, North Korea tensions intensify

Javier Stokes
August 14, 2017

Aug 11 (Reuters) - U.S. stocks were modestly higher in late morning trading on Friday as investors cautiously dipped back into riskier assets, after a three-day losing streak on concerns over escalating tensions between the United States and North Korea.

Benchmark 10-year notes US10YT=RR were last up 12/32 in price to yield 2.201 percent, from 2.242 percent late on Wednesday.

Tokyo's Nikkei 225 tumbled 1.3 percent to 19,740.12 and Seoul's Kospi fell 0.8 percent to 2,375.88.

The yen on Friday added to a strong weekly rally against the dollar of close to 1.5 percent, hitting its highest versus the greenback in nearly four months, at 108.73 yen.

"We would now be careful with a whiff of risk aversion in the air and, by extension, also stay away from shorts in the rates market", RBC's global macro strategist Peter Schaffrik said.

Major indexes in Europe closed mostly lower. The remarks, following North Korea's earlier revelation of a plan to launch a salvo of ballistic missiles toward the U.S. Pacific territory of Guam, gave investors further incentive to take to the sidelines at least in stock markets. The dollar hit an eight-week low against the yen Thursday on U.S.

Markets are now awaiting U.S. consumer price data for July, due later in the session.

New York Federal Reserve President William Dudley expects sluggish USA inflation to rise over the next several months.

U.S. stocks tumble on North Korea worries
Earlier in the week, Trump said the USA would unleash "fire and fury" on North Korea if it continued to threaten the U.S. Avis Budget Group slumped 9.9 percent after the auto rental company cut its guidance following a weak second quarter.

The U.S. equity market is hovering near record levels and volume has been tepid following the onset of summer.

Disappointing US inflation and jobs data have not helped the dollar. The Nasdaq added 39.68 points, or 0.6 percent, to 6,256.56. Seagate shares rose 74 cents to $32.29.

The sell-off is likely to extend into the European session, with financial spreadbetter CMC Markets expecting Germany's DAX and France's CAC 40 to open down about 0.7 per cent each and Britain's FTSE 100 to start 0.55 per cent lower. Meanwhile, after jumping $10.80 to $1,290.10 an ounce in the previous session, gold futures are climbing $6.50 to $1,296.60 an ounce.

Both the Swiss franc and the yen have climbed against the dollar this week, after U.S. President Donald Trump warned North Korea that it would face "fire and fury" if it threatened the United States.

Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in US crude inventories, leaving prices volatile.

"It's been a bit of a roller coaster this week, with all the rhetoric between the U.S. and North Korea", said Jeff Kravetz, regional investment strategist at U.S. Bank Wealth Management.

Tensions between the USA and North Korea continued to simmer early Friday. October Brent crude fell $0.80, or 1.5%, to $51.90 a barrel.

Toshiba has at last reported earnings for the year ended in March, fending off a delisting for now, but the Japanese conglomerate could still be kicked out of the stock market if it cannot conclude the sale of its memory unit by the end of March. The Nasdaq is on track for a weekly loss of 1.5%, its worst since June. CP Foods, one of the world's biggest poultry, pork and seafood processors, is forecast to rally 28 percent within a year, the top projected gain based on consensus analyst price targets compiled by Bloomberg.

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