Global shares rally to Korea tensions’ ease as yen, gold fall

Global shares rose Tuesday, while the Japanese yen and gold dropped after North Korea’s leader delayed a decision on firing missiles towards Guam, easing tensions and prompting investors to buy riskier assets.

According to reports monitored by businessamlive, the pan-European STOXX 600 index rose 0.1 percent, with financials.SX7P among the gainers, while energy stocks.SXPP lose ground as oil prices fell as well as assets that generally do well in time of market or geopolitical turbulence, which were among fallers on Tuesday.

Gold, viewed as a safe haven for investors in troubled times, fell 0.6 percent to $1,275 an ounce, while oil prices steadied somewhat after falling more than 2.5 percent on Monday to its lowest in about three weeks on the strength of the dollar and reduced refining in China.

Specifically Brent crude LCOc1, the international benchmark, was last down 30 cents at $50.43 a barrel.

The yen, which tends to gain on expectations that Japanese investors will repatriate assets in a crisis, also fell 0.7 percent to 110.38 per dollar.

The STOXX 600 index rose 1.1 percent on Monday after U.S. officials played down prospects of the standoff between North Korea and the United States leading to conflict.

The S&P 500 .SPX equally rose 1.0 percent on Monday, the biggest daily percentage increment since April. In the same vein, Japan’s Nikkei stock index .N225 ended 1.1 percent higher, boosted by the weaker yen, a day after skidding 1 percent to its lowest since early May.

Morgan Stanley Capital International’s (MSCI’s) broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gave up most of the day’s gains but remained in positive territory. Australian stocks closed up 0.5 percent. South Korea’s markets were closed for a holiday.

Other currencies’ performance, apart from the Japanese yen, was strong.

The Swiss franc, which gained 1.1 percent on Aug. 9 as the war of words over the Korean peninsula intensified, held steady at 0.9719 per dollar.
This followed a 1.1 percent fall on Monday.

The euro was down 0.3 percent at $1.1749, helping to push the dollar index .DXY, which measures the greenback against a basket of currencies, up 0.3 percent.

Comments from New York Federal Reserve President William Dudley also supported the dollar. He told the Associated Press he would favour a third increase in Fed interest rates this year if the economy developed as he expected.

Sterling GBP=D3 hit a five-week low of $1.2867, falling below $1.29 for the first time since July 13, after UK inflation undershot expectations, making a rise in Bank of England interest rates less likely.

In debt markets, yields on low-risk German and U.S. government bonds rose.

German 10-year yields DE10YT=TWEB, the benchmark for euro zone borrowing costs, rose 3.5 basis points to 0.44 percent, having fallen to as low as 0.38 percent on Friday.

U.S. 10-year Treasury yields US10YT=RR rose 4 bps to 2.25 percent, up from a six-week low of 2.18 percent touched on Friday.

The market developments, according to analysts were due largely to North Korea’s leader Kim Jong Un tamping down action after receiving a report from his army on its plans to fire missiles towards the U.S. Pacific territory of Guam.

The North Korean leader is said to be watching the actions of the United States for a while longer before making a decision, the North’s official news agency said on Tuesday.

“There is a more relaxed attitude being taken towards the Korean situation in markets. With the report that North Korea has put its plans on hold, there is a sense of stepping back from the brink,” Rabobank analyst Lyn Graham-Taylor is reported to have said.