Escalating tension after U.S. President Donald Trump stepped up the rhetoric against North Korea has hit global stocks again in Asia and looks set to push Europe lower at the opening. World stocks are on track for their biggest weekly fall since the week before Trump was elected.
Yields on low-risk German government bonds dropped to their lowest in three weeks after further declines in U.S. Treasury yields and gold is holding at more than two-month highs.
Asian regional stock markets took a pounding. South Korea’s KOSPI was down 1.7 percent and Hong Kong’s Hang Seng 1.8 percent. Chinese mainland shares were also down 1.8 percent. Australia was off 1.2 percent.
That came after the S&P 500’s biggest one-day fall in nearly three months on Thursday, led lower by technology stocks. The VIX “fear gauge” chalked up its highest close since the presidential election. It’s worth remembering the Dow Jones ended at a record high close as recently as Monday.
- N.Korea considers missile strike after Trump’s warning
- Japan defence review warns of enhanced North Korea threats
The dollar touched an eight-week low against the yen in Asian trade but is up slightly against a basket of major currencies after falling for the past two days. The yen was last marginally weaker at 109.22 to the dollar and the euro was down 0.1 percent at $1.1762.
Futures indicated European shares would extend the previous two sessions’ slide. The STOXX 600 was already on track for one of its worst weeks this year, and the VSTOXX, Europe’s main gauge of equity investor anxiety, saw its biggest one-day rise in nearly two years, though it remained at depressed levels. HSBC’s European equity strategists said the probability of a correction was rising, pointing out this was the second-longest stretch of broadly uninterrupted gains for the MSCI Europe in the current bull market.
With most European companies having reported second-quarter earnings, a divergence between the performance of euro zone corporates – whose earnings are dented by a stronger euro – and the broader pan-European index, which includes the UK, Switzerland and Nordics, was increasingly visible. Earnings growth for the 81 percent of MSCI Europe companies having reported so far was tracking 24 percent, Thomson Reuters data showed. MSCI Euro zone companies were seeing 16 percent earnings growth for the second quarter.
In other company news and potential stock movers: Innogy adds customers in Britain, market remains tough; Akzo Nobel wins again in court battle with hedge fund Elliott; Italy extends deadline for Telecom Italia report on Vivendi – source; Mitsui, Cobra in talks with BHP over desalination plant –sources; Britain’s Nationwide posts 18 pct fall in Q1 profit; Restaurant Group, Greene King get new finance heads; Old Mutual to list two units next year, H1 profit up 37 pct. (Reuters)