Stocks, dollar extend slide as US, North Korea tensions intensify

Stocks, dollar extend slide as US, North Korea tensions intensify

Traders across the globe reacted with dismay to Trump's warning Thursday that his earlier threat to unleash "fire and fury" on the reclusive nuclear-armed state may not have been "tough enough".

"What has changed this time is that the scary threats and war of words between the USA 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.

Nervous investors drove shares lower earlier in the week, after President Trump declared Tuesday that the USA would react with "fire and fury" to further nuclear provocations from North Korea.

It has been more than a year since the last 5% downdraft in stocks and more than 76 weeks since the stock market suffered a 10% loss.

USA stocks deepened their losses following the latest Trump comments, and the S&P 500 volatility index, known unofficially as the "fear index", rose decisively.

The Dow Jones industrial average closed 0.9% lower on Thursday, while the S&P 500 dropped 1.5% and the Nasdaq shed 2.1%.

The yen on Friday added to a strong weekly rally against the dollar of close to 1.5 per cent, hitting its highest versus the greenback in nearly four months, at 108.73 yen.

With Japanese markets closed for a public holiday, Hong Kong led the downward charge in Asia-Pacific as the Hang Seng lost more than two percent.

SAFE HAVEN FLOW: The most traditional safe havens at times of mounting geopolitical unrest are the Swiss franc and the gold, and both were big movers on Wednesday.

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.

Looking at the yen, overnight trading was fairly subdued with a 109.89/110.16 range taking hold.

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On Friday, the dollar set an eight-week low against the yen, Australian stock futures slumped early and other Asian markets looked set to follow on the tensions between the United States and North Korea.

The Korean won also continued to fall, down 0.45 percent to 1,147.2.

The dollar was further weighed down on Friday by the soft US inflation data. Germany's DAX Index fell 0.6%, the UK's FTSE 100 Index retreated 1.2% and France's CAC 40 Index slid 1.4%. It is poised to end the week down 1.3 percent.

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

U.S. Treasury long-dated yields dropped to six-week lows, pressured by U.S. "There are four more (inflation) prints between now and the December FOMC meeting and we expect the Fed to remain data-dependent, if a touch more cautious", TD Securities said in a note.

The 30-year bond last rose 6/32 in price to yield 2.7847 percent, from 2.794 percent late on Thursday.

Spot gold XAU= was up 0.2 percent at $1,287.90 per ounce at 0042 GMT.

This week has seen its biggest rise since June 2016.

Crude oil prices tumbled on the back of the selloff on Wall Street and lingering concerns over global oversupply.

U.S. crude rose 0.41 per cent to US$48.79 per barrel and Brent was last at US$52.01, up 0.21 per cent.

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