Wall Street swings lower after Trump warns North Korea

Patrice Gainsbourg
Agosto 13, 2017

However, U.S. stocks recovered temporarily late on Wednesday as investors appeared to brush off the geopolitical concerns following encouraging comments from Secretary of State Rex Tillerson.

Now installed in the White House, Trump issued a new warning to Pyongyang on Friday, tweeting: "Military solutions are now fully in place, locked and loaded, should North Korea act unwisely".

North Korea claimed "only absolute force" can work on someone as "bereft of reason" as Trump and detailed plans to fire a salvo of missiles into waters around the US Pacific territory of Guam. "If we were threatened, the USA would take action and there'd be a Treasury rally", said Battle.

European markets were also struggling amid the simmering political stand-off, with the Cac 40 in France dropping 1.4% and Germany's Dax tumbling by 1.1%.

At 12:28 p.m. ET, the Dow Jones Industrial Average was down 52.87 points, or 0.24 percent, at 22,032.47, the S&P 500 was down 2.8 points, or 0.11 percent, at 2,472.12.

The last time the S&P 500 fell over 1 percent was on May. 17.

The CBOE Volatility Index, the most widely followed barometer of expected near-term stock market volatility, rose to a near three-month high of 15.36.

France's CAC 40 extended losses to hit a session low, down 1.2 percent after the vehicle incident in Paris. "Pretty remarkable, perhaps even extraordinary, considering", said Tim Ash, strategist at fund manager BlueBay.

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At the moment stock falls have not been too dramatic - the bluechip index is at a higher level than it was a week ago. The Korea tensions though have seen both US and European markets this week push back expectations of when the Fed and ECB might hike interest rates.

The technology sector was the S&P's biggest drag with a 2.2 percent drop.

Mounting tensions lifted USA defense stocks.

"If the data continues to come in on the softer side, the market might start to price the Fed staying on hold this year", said Sireen Harajli, FX strategist at Mizuho in NY. The Russell 2000 index of smaller-company stocks gave up 8 points, or 0.6 percent, to 1,401.

In the United Kingdom, the FTSE 100 closed down 0.59%, or 44.67 points, at 7498, broadly in line with negative trends in European markets. "That did temporarily shake investors' complacency, but we think markets are ready to move higher in the back half of the year, and earnings and economic data are going to drive that". But some economists say the Fed may stand pat for the rest of 2017 unless inflation accelerates in coming months.

Strong results from Scout24 and Novo Nordisk lifted those shares, but the pan-European STOXX 600 extended early losses to fall 0.7 percent. It soared over 2 percent in the previous two sessions, and is set for a weekly gain of 2.25 percent.

Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in US crude inventories. Brent crude, used to price global oils, gained 16 cents to $52.30 in London.

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