War Rhetoric Has Dollar, Bonds And Gold Bid, Stocks Lower

New York (Aug 9)  Capital Markets are on the defense as a risk-off tone dominates proceedings overnight, with gold ($1,268.34) and the Japanese yen (¥109.70) advancing and sovereign bond prices edging higher as tension grows between the US and North Korea.

Gold prices are heading for its largest gain this month while JPY and CHF remain the biggest winners among G-10 currency pairs after President Trump issued a warning yesterday that if North Korea escalates the nuclear threat, "they will be met with fire and fury like the world has never seen." Global equities are slumping while oil prices retreat on 'oversupply' concerns.

In retaliation, North Korean's state-run media issued a statement saying, "US war hysteria will bring a miserable end." The market is concerned that North Korea could strike before any preemptive attack by the US.

Note: North Korea said it was examining an operational plan for firing a ballistic missile toward Guam, a US territory in the Pacific Ocean.

Stocks Sea of red

In Japan, the Nikkei skidded to a 2-1/2 month low on rising North Korea risk. The index dropped -1.3% overnight, the weakest closing level since May 31, but defense equipment makers attracted buyers. The broader Topix Japan's Topix index fell -1.1%, the most since May 18.

In Hong Kong, shares ended lower, but developers provided support. The Hang Seng index fell -0.4%, easing away from its two-year high print on Tuesday, while the China Enterprises Index lost -1.1%.

In China, financials dragged stock markets lower amid concerns that regulators will continue to clamp down on debt risks, but strong gains in consumer staples left major indexes only slightly lower on the day. The blue-chip CSI300 was unchanged, while the Shanghai Composite Index dipped -0.2%.

The outlier was Australia's S&P/ASX 200 Index resisted the region-wide downward trend to add +0.4%.

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