Investors move toward safe havens on political tension

Stocks fluctuated at the end of the week before ending little changed and Treasuries gained with gold, as investors reached for safe haven assets after North Korea ratcheted up its threats against the U.S.

The S&P 500 Index, churning in one of the tightest ranges in its history, rose slightly, continuing an eight-day stretch without a move of more than 0.3 percent. The dollar fell after North Korea’s leader promised retaliation. The pound weakened following U.K. Prime Minister Theresa May’s speech on Brexit. The euro gained on strong economic data before Germany votes on Sunday. Crude maintained its rally above $50 a barrel as OPEC members gathered in Vienna.

Central bank policy vied with continued geopolitical tension for investor attention this week. The latter won out Friday after North Korea’s foreign minister suggested the country could test a hydrogen bomb, sparking haven demand. The dollar slid, erasing a rally sparked by the Federal Reserve’s signal that it intends to wind down its balance sheet and raise interest rates.

Banks, the biggest gainers from interest rate rises that cushion margins, jumped 1.4 percent to a one-month high on the prospect of the European Central Bank following the United States in bringing ultra-loose monetary policy to an end.

Analysts have been increasing their earnings expectations for European banks for much of the past 12 months. Commerzbank rose 3.5 percent on reports of merger approaches.

Reuters reported on Wednesday UniCredit had approached Commerzbank for a possible merger, and German weekly WirtschaftsWoche on Thursday said the government favours a merger of the state-backed bank with France’s BNP Paribas. BNP shares rose 1 percent while Unicredit was up 2 percent.

Meanwhile, purchasing managers indexes from German and French manufacturers and a composite euro-zone private-sector activity gauge provided support for European policy makers as they consider scaling back stimulus. Germany goes to the polls on Sunday, with Chancellor Angela Merkel expected to secure a fourth term, although she may not win an outright majority.