Missile sparks market retreat

INVESTORS were on tenterhooks last night awaiting the official US response to the latest missile launch from recalcitrant nation North Korea after earlier driving Australian shares to their lowest level since late June.

The benchmark ASX 200 index retreated 0.7 per cent to 5669 points, while the broader All Ordinaries index was also off 0.7 per cent at 5733.6.

Financial and consumer stocks bore the brunt of the $12 billion sell-off.

Markets across Asia were on high alert after Japanese officials confirmed a North Korean ballistic missile had crossed over the island of Hokkaido early yesterday before landing in the Pacific.

Japan’s benchmark Nikkei index shed 0.5 per cent after retracing some of its losses while Hong Kong’s Hang Seng dipped 0.1 per cent.

Currency traders piled into the Japanese yen at the expense of the US dollar, while the Australian dollar was down half a cent against the greenback late yesterday at US79.27c.

CMC chief market analyst Ric Spooner said the development added a worrying layer of uncertainty to share markets given it was a more direct act of provocation than previous episodes. “There is a difference between this situation and oth- ers during the past 50 years,” Mr Spooner told Business Daily. “We saw Iraq, Afghanistan and even the Vietnam War but this is a situation where if it did go pear-shaped, it could damage developed economies and be a significant negative for Japan and the US.”

Given the amplification of rhetoric between Pyongyang and Washington, the reaction from the White House would be critical, he said.