Global stocks extend rally as North Korea fears wane

World stock markets charged higher yesterday, extending this week’s rally as fears receded over a potential clash between the United States and North Korea.

Investors have cashed out of haven assets, like gold and the Japanese yen, and ploughed back into riskier assets like equities.

Asian stocks extended a relief rally into a second day, after Pyongyang appeared to put on ice its plan to launch missiles near Guam, and after a strong showing on Wall Street overnight.

Europe followed suit, with Frankfurt emboldened also by news that the German economy grew by 0.6 percent in the second quarter. That however marked a slowdown from 0.7-percent expansion in the first quarter.

“The rhetoric between the United States and North Korea appears to have softened somewhat, helping risk market sentiment,” NFS Macro analyst Nick Stamenkovic told AFP.

“In addition, robust German second-quarter GDP data highlights the favourable fundamental backdrop for European equities.

“Indeed, it appears investors have perceived last week’s sell off as an opportunity to raise exposure to stocks.”

Traders also breathed a sigh of relief as senior US figures dialled down tensions with North Korea, after a war of words had sent stocks tumbling last week.

US Defence Secretary Jim Mattis and Secretary of State Rex Tillerson wrote in The Wall Street Journal that America has “no interest” in regime change in Pyongyang, and stressed the importance of a diplomatic solution to the crisis.

And North Korean leader Kim Jong-un hinted yesterday he would hold off on the plan to test-fire missiles towards the US Pacific island territory of Guam, saying he would “watch a little more the foolish and stupid conduct of the Yankees”.

The dollar moved off recent lows after New York Federal Reserve Bank President William Dudley indicated another interest rate increase this year was likely and suggested the central bank would reveal plans to reduce its balance sheet next month.

Asian investors also appeared to take in their stride rising trade tensions between China and the US as Beijing warned that it “will not sit idle” if a US probe into its intellectual property practices leads to sanctions.