Geopolitical tensions spike volatility

On Friday European equities dropped, headed for their worst week since November, as volatility spiked amid intensifying geopolitical tensions between the U.S. and North Korea.

The Stoxx Europe 600 Index dropped 0.6 percent at 8:31 a.m. in London, its third day of losses, as U.S. President Donald Trump stepped up his warning to North Korea over its threats to American allies. The benchmark is on track for a 2.3 percent decline this week. The VStoxx Index of euro-area volatility gained 5 percent to its highest level since April.

Following Trump’s warning of unleashing “fire and fury” on North Korea earlier this week, the president warned the regime not to follow through with a missile test near Guam, promising massive response to any strike against the U.S. or its allies.

All 19 industry groups on the Stoxx 600 fell, with volume about 13 percent higher than the 30-day average at this time of day. A gauge of mining shares sank 2.6 percent, with shares of Rio Tinto Group and Glencore Plc among the biggest decliners amid drops in iron ore and steel prices. ArcelorMittal, the world’s top steelmaker, dropped 4.2 percent.

Asian equities excluding Japan slid the most in eight months on Friday as the rhetoric between U.S. and North Korean leaders intensified. The MSCI Asia Pacific Index excluding Japan lost 1.6 percent to 155.61 as of 4:57 p.m. in Hong Kong, set for its longest losing streak since July 4, as five stocks declined for each one that advanced. Financial and technology shares dropped the most. Stocks in developed Asia, China, South Korea and Indonesia fell more than 1 percent, while Japanese markets are closed for a holiday.

Oil investors are back to being skeptical over whether OPECled production cuts are draining a global glut fast enough, keeping prices below $49 a barrel and driving crude toward a second weekly loss.