Trump’s ‘fire and fury’ warn­ing has in­vestors scur­ry­ing

The Star Early Edition - - INTERNATIONAL - Nigel Stephen­son

US PRES­I­DENT Don­ald Trump’s warn­ing that North Korea faced “fire and fury” and Py­ongyang’s re­sponse it was con­sid­er­ing an at­tack on Guam drove in­vestors out of stocks yes­ter­day and into the safety of the yen, Swiss franc, gold and gov­ern­ment debt.

Euro­pean shares fell, fol­low­ing falls in Asia and on Wall Street. US stock in­dex fu­tures also fell, with the S&P 500 in­di­cated to open down 0.4 per­cent.

“Trump’s com­ments about North Korea have cre­ated ner­vous­ness and the fear is if the pres­i­dent re­ally means what he said about ‘fire and fury’,” said Naeem As­lam, chief mar­ket an­a­lyst at Think Mar­kets in Lon­don.

“The typ­i­cal text book trade is that in­vestors rush for safe havens.”

Trump’s re­marks on Tues­day that North Korea would face “fire and fury like the world has never seen” pushed Wall Street lower, with only util­i­ties mak­ing gains and drove the VIX “fear gauge” of ex­pected volatil­ity on the S&P 500 to its high­est in al­most a month. The VIX last stood at 11.49, just be­low Tues­day’s high of 11.52.

A spokesman for the Korean Peo­ple’s Army said in a state­ment it was “care­fully ex­am­in­ing” plans for a mis­sile at­tack on the US Pa­cific ter­ri­tory of Guam, which has a large US mil­i­tary base.

In Europe, the pan-con­ti­nen­tal STOXX 600 in­dex lost 0.8 per­cent, with falls deep­en­ing af­ter re­ports a car had rammed a group of sol­diers in Paris, in­jur­ing six.

France’s CAC dropped 1.2 per­cent and Ger­many’s DAX fell 1.1 per­cent.

Ex­porters hit

Tokyo’s Nikkei 225 share in­dex closed down 1.3 per­cent at its low­est since June 1 as the strong yen hit ex­porters, while South Korea’s KOSPI in­dex fell 1.1 per­cent to seven-week lows.

South Korea’s won cur­rency dropped 0.9 per­cent against the dol­lar to its low­est close since July 13.

MSCI’s main in­dex of Asia-Pa­cific shares, ex­clud­ing Ja­pan, was last down 0.5 per­cent. Chi­nese blue chips closed flat but Hong Kong’s Hang Seng in­dex was last down 0.2 per­cent.

In­stead, in­vestors turned to the tra­di­tional safe-haven as­sets sought in trou­bled times, the Ja­panese yen strength­ened 0.5 per­cent to 109.73 to the dol­lar, an eight-week high, and the Swiss franc re­versed a two-week los­ing streak and gained nearly 1 per­cent to 0.9650 per dol­lar.

The Swiss cur­rency was also on track for its big­gest daily gain against the euro since last year’s Brexit vote.

Risks

“Height­ened geopo­lit­i­cal risks overnight have seen the mar­kets flip from risk-on to riskoff and we have to wait and see how long this move runs be­fore adding some po­si­tions,” said Vi­raj Pa­tel, an FX strate­gist at ING in Lon­don.

The dol­lar in­dex, which mea­sures the US cur­rency against a bas­ket of ma­jor peers, slipped 0.1 per­cent as US Trea­sury yields fell.

The euro dipped 0.1 per­cent to $1.1737 but the sin­gle Euro­pean cur­rency has been slip­ping this week against the dol­lar, hav­ing hit a more than two-and-a-half year high of $1.1892 on Au­gust 2. Yields on core gov­ern­ment debt fell. Tenyear US yields dropped 4 ba­sis points to 2.242 per­cent and Ger­man equiv­a­lents fell 3bps to 0.44 per­cent, their low­est since June 30. Gold rose 0.6 per­cent to $1.268 an ounce.

“We’ve had some com­pet­ing forces play out over the past 12 hours – the US dol­lar was stronger off eco­nomic data, but that was quickly re­versed with Pres­i­dent Trump’s com­ments about North Korea ear­lier to­day (yes­ter­day),” said ANZ an­a­lyst Daniel Hynes.

Oil prices fell for a third day on doubts over Opec’s abil­ity to limit sup­ply. Brent crude dipped 5 cents to $52.18 a bar­rel. – Reuters

PHOTO: AP

US Pres­i­dent Don­ald Trump de­liv­ers a state­ment on North Korea dur­ing a brief­ing on the opi­oid cri­sis at Trump Na­tional Golf Club in New Jersey on Tues­day.

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