Stock markets regain lost ground

Easing of US-North Korea tensions stops sell-off

Global stock markets clawed back losses yesterday as spiralling tensions over North Korea showed tentative signs of easing, reducing appetite for haven assets.

Fears of a catastrophic confrontation between Washington and Pyongyang were calmed when CIA director Mike Pompeo said on Sunday there was “nothing imminent” in the escalating stand-off.

Equities were also boosted by a positive lead from Wall Street on Friday, after investors waded back into the market following a three-day sell-off.

“European equity markets appear to have left the fears of late last week behind, with investors coming out of their defensive positions to move back into riskier assets,” said Joshua Mahony, a market analyst at traders IG.

In Asia, Hong Kong was back in positive territory yesterday after slumping 2% on Friday, while Shanghai ended the day higher despite data showing Chinese industrial production slowed sharply last month.

However, Tokyo closed 1% down as traders returned from a three-day holiday weekend to play catch-up after Asian and European shares had dropped on Friday, with the Nikkei finishing at its lowest level in more than three months.

“What we are seeing today is relief at the [geopolitical] situation not deteriorating over the weekend, something traders were clearly wary of towards the end of last week,” said Oanda analyst Craig Erlam.

Analysts cautioned that with joint South Korean-US military exercises scheduled and North Korea celebrating “Liberation Day” today, volatility could return to markets.

“We are not out of the woods yet and the situation in North Korea will remain front and centre,” said Chris Weston, the chief market strategist at IG Markets. –