Wall Street reels under North Korea tensions, tepid retail earnings

Andrew Cummings
August 12, 2017

The Federal Reserve's hint about unwinding balance sheets, the possibility of the European Central Bank tapering stimulus and the looming debate about the USA debt ceiling in the fall challenge the market's recent performance, Mr. Baele said.

Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a sell-off, and the tensions over North Korea have proved the trigger.

If North Korea launches an attack that threatens the United States then China should stay neutral, but if the United States attacks first and tries to overthrow North Korea's government China will stop them, a Chinese state-run newspaper said on Friday.

Gold, another classic safe haven asset, was trading at around $1,285 per ounce, up more than two percent this week and near a nine-week high.

US President Donald Trump issued a new threat to North Korea, saying American weapons were "locked and loaded" as Pyongyang accused him of driving the Korean Peninsula to the brink of nuclear war. They soared over 2 percent in the previous two sessions, and are set for a weekly gain of 2.2 percent.

The focus on North Korea has largely overshadowed a Labor Department report showing an unexpected drop in US producer prices in the month of July. Thursday's producer-price index came out tepid, analysts said.

The dollar last changed hands at 108.96 yen, down 0.2 percent.

Excluding food and energy prices, core producer prices still dipped by 0.1 percent in July after creeping up by 0.1 percent in June.

A separate report from the Labor Department showed an unexpected uptick in initial jobless claims in the week ended August 5th. The dollar index slipped to a one-week low on Friday after the USA data.

Cempra (CEMP) is leading the biotech sector lower after reporting a narrower than expected second quarter loss but weaker than expected revenues.

Significant weakness is also visible among semiconductor stocks, as reflected by the 2.2 percent loss being posted by the Philadelphia Semiconductor Index.

Stocks across Asia-Pacific markets are lower today amid rising geo-political tensions in the region. The euro touched a one-month low of 128.19 yen earlier on Friday.

"What has changed this time is that the scary threats and war of words between the US and North Korea have intensified to the point that markets can't ignore it", said Shane Oliver, head of investment strategy at AMP Capital in Sydney.

Hong Kong stocks dipped sharply at the open: Falls in China have been nearly doubled by Hong Kong's Hang Seng index, which were down by 1.2% shortly after the index opened at 11:30am AEST.

USA crude oil futures settled almost 2 percent lower at $48.59 a barrel, as Russian Federation considered a future output resumption and the Organization of the Petroleum Exporting Countries boosted its July production numbers.

In the bond market, treasuries are extending the notable upward move seen in the previous session.

The benchmark US yield on Thursday was just above 2.2 percent, at its lowest level since late June, as investors bought up Treasuries, a classic safe harbor.

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