Asian market bounces from early losses

Asian markets rebounded to sit mostly higher yesterday as early nervousness over North Korea’s latest sabre-rattling gave way to bargain-buying following the previous day’s steep losses. Traders ran for the sidelines in the morning after Washington confirmed that Pyongyang had for the first time tested a missile capable of reaching the United States, ratcheting up pressure on the already tense Korean peninsula. But in the afternoon the selling and rush for safe-haven assets such as the Japanese yen reversed.

By the close Tokyo was up 0.3 percent, while Seoul also added 0.3 percent and Singapore jumped 0.8 percent. Hong Kong gained 0.5 percent in late trade after diving 1.5 percent Tuesday, and Shanghai ended 0.8 percent up. However Sydney finished 0.4 percent off while Wellington and Jakarta also edged down. Despite the gains, dealers remain on edge and are now awaiting the next development after Russia and China issued a joint appeal to ease tensions while the United Nations Security Council will hold an emergency meeting later in the day.

The test came just as the US was preparing to celebrate Independence Day and days before a G20 summit, where it will likely top the agenda. It was the latest provocation by North Korean leader Kim Jong-Un who is determined to develop a nuclear weapons program he says is needed to ward off invasion. South Korea and the US yesterday launched a barrage of missiles simulating a precision strike against Pyongyang, in response to the provocation.

“Traders and investors may be wondering what reaction this latest missile test will get,” said Greg McKenna, chief market strategist at AxiTrader. Traders were given few leads with European markets slightly down and Wall Street closed for the July 4 holiday. Tech firms saw some much needed buying after suffering a recent sell-off as global central banks consider tightening monetary policy.

The sector has been a huge beneficiary of the years of cheap borrowing from lenders, sending their stock prices soaring, but the prospect of an end to such largesse has led to profit-taking. Hong Kong-listed Tencent edged up from Tuesday’s fall of more than four percent, while AAC Technologies also bounced and Sony jumped 0.8 percent in Tokyo. Investors are awaiting the release of minutes from the Federal Reserve’s June policy meeting and key US jobs data tomorrow.

European markets wobble

Meanwhile, European stock markets wobbled yesterday on investor jitters over North Korea’s latest saber-rattling. London sagged 0.1 percent while Frankfurt and Paris eked out slender gains of 0.1 percent. “Investors over in Europe are not ignoring the bout of risk aversion triggered by North Korea’s ongoing missile tests,” said analyst Naeem Aslam at trading firm Think Markets. “The geopolitical tensions remain a major threat for the global stability and economic health and traders would not ignore this fact.”

Traders ran for the sidelines after Washington confirmed that Pyongyang had for the first time tested a missile capable of reaching the United States, ratcheting up pressure on the already tense Korean peninsula. Sentiment was somewhat subdued with Wall Street having been shut Tuesday for the Independence Day holiday. Investors meanwhile waited for the publication of minutes from the US central bank’s most recent meeting, ahead of key jobs data tomorrow. “The Federal Reserve will release the minutes from the June meeting and investors will get an insight into what the US central bank was thinking when it raised interest rates for the second time this year,” said CMC Markets analyst David Madden. “Since then, Janet Yellen, the chair of the Federal Reserve announced there will be further monetary tightening, but it will be ‘timely and predictable’.”

The Fed last month raised its benchmark interest rate by a quarter point to 1.0-1.25 percent. The US central bank said it expected to lift borrowing costs for a third time this year, brushing aside weaker inflation and consumption data in recent weeks. Earlier yesterday, Asian equity markets rebounded to sit mostly higher as early nervousness over North Korea gave way to bargain-buying.

Despite those gains, dealers remain on edge and are now awaiting the next development after Russia and China issued a joint appeal to ease tensions while the United Nations Security Council will hold an emergency meeting later in the day. The test came just as the US was preparing to celebrate Independence Day and days before a G20 summit, where it will likely top the agenda.

It was the latest provocation by North Korean leader Kim Jong-Un who is determined to develop a nuclear weapons program he says is needed to ward off invasion. South Korea and the US on Wednesday launched a barrage of missiles simulating a precision strike against Pyongyang, in response to the provocation. “Traders and investors may be wondering what reaction this latest missile test will get,” said Greg McKenna, chief market strategist at AxiTrader. — Agencies