Wall Street lower on US-North Korea tensions

No one wants this – at least we hope no one wants this. Leo_Traveling  Shutterstock

No one wants this – at least we hope no one wants this. Leo_Traveling Shutterstock

But although USA equities on Wednesday managed to close only slightly down even after Trump's warning that "fire and fury" would rain on North Korea, on Thursday the chickens came home to roost on Wall Street.

The index, which hovered below record highs this week, has slipped more than 3 per cent since Mr Trump said on Tuesday that the United States would unleash "fire and fury" if Pyongyang continued to issue threats. But some investors welcomed the dip in the sector, which has been S&P's leading gainer so far this year.

In other news, U.S. wholesale inflation dropped in July, the first contraction in almost a year and another data point that could weaken the case for the Federal Reserve to raise the benchmark interest rate again later this year.

Developments regarding the situation with North Korea may remain in focus next week, although traders are also likely to keep an eye on reports on retail sales, housing starts, and industrial production.

The three major USA indices have sold off this week amid investors' jitters after Trump said on Tuesday that threats from Pyongyang would be "met with fire and fury like the world has never seen".

Earlier this week, Trump said the country would unleash "fire and fury" on North Korea if it continued to threaten the United States.

Many market participants have been calling for a significant decline on the S&P 500.

Additionally, China weighed in on the standoff, saying in an editorial in state-run Global Times (http://www.globaltimes.cn/content/1060791.shtml) that Beijing will intervene if the USA strikes first against North Korea.

The suspected range of North Korea's missiles based on their ICBM tests. Chris Jones  IFLScience
The suspected range of North Korea's missiles based on their ICBM tests. Chris Jones IFLScience

"The equity markets are in risk reduction mode as investors move to secure liquidity with speculators exacerbating moves through tactical shorts", Stephen Innes, head of trading at for Asia-Pacific at Oanda Corp.in Singapore, said in a note Friday. Apple was down 2.3 percent, weighing most on the index.

Later on Friday, the USA will release inflation data for the month of July. Perrigo rose $2.17, or 2.8 percent, to $79.01. They suggest the US and China, a North Korean ally, could work together to de-escalate the situation.

Biotechnology, tobacco, and transportation stocks also saw considerable strength, while steel stocks extended a recent move to the downside. For the week, the benchmark slipped 2.6%.

Amid the hot rhetoric, US stocks sold off sharply on Thursday, with the S&P 500 falling more than 1 percent.

The Korean won continued to fall versus the dollar, down 0.13 percent to 1,143.5 on Friday for a 1.6 percent decline on the week. Travel-review website operator TripAdvisor was down 2.7 per cent.

The yen on Friday added to a strong weekly rally against the dollar of close to 1.5 percent, hitting its highest versus the greenback in nearly four months, at 108.73 yen. Gold jumped to a nine-week high and the yen pushed toward 109 per dollar. The index is bouncing off its lowest closing level in six months. In Australia, the S&P/ASX 200 was down 1.13%. Hong Kong's Hang Seng was off 0.3 percent.

The CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the election.

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