European stocks followed most Asian equities higher as tensions surrounding North Korea eased. The yen dropped as demand for safe-haven assets began to fade, although gold and the Swiss franc held Tuesday’s gains.
Every sector of the Stoxx Europe 600 Index advanced after President Donald Trump’s measured response to North Korea’s missile launch and comments from Kim Jong Un suggested the situation won’t escalate. Equity indexes in Japan, Hong Kong and South Korea rose, while U.S. stock futures were also green. Most bonds fell as the risk-off mood ebbed. The euro weakened as data showed German inflation accelerating, and the dollar rose as Goldman Sachs Asset Management called the greenback “ very, very attractive.”
Kim said yesterday the missile was fired in protest at annual military exercises between the U.S. and South Korea. Coupled with Trump’s tempered remarks – the president said the U.S. will consider “all options” in its response to the provocation – investors judged the standoff is unlikely to intensify, helping to underpin risk assets.
“We’ve seen the typical reaction that you would expect yesterday, with the safe-haven assets like the yen gaining and the Korean won obviously weakening and equity markets in this region selling off,” Khoon Goh, Australia & New Zealand Banking Group Ltd.’s head of Asia research, said in a Bloomberg Television interview. “What’s interesting is that the reaction has been fairly muted and a lot of the moves have largely reversed and I think it’s a case now where what’s happening with North Korea is not necessarily new.”
US GDP: The U.S. updates second-quarter GDP and core price data yesterday, while the ADP Research Institute’s monthly report on hiring trends is the same day. The August payrolls report is on Friday. Currency traders will be looking for a statement of independence from South African Reserve Bank Governor Lesetja Kganyago when he speaks on the central bank’s role.
STOCKS: The Stoxx Europe 600 Index rose 0.7 percent as of 8:03 a.m. in New York, the largest advance in more than a week. The U.K.’s FTSE 100 Index rose 0.4 percent, the biggest advance in more than a week on a closing basis. Germany’s DAX Index rose 0.6 percent, the largest advance in more than a week. Futures on the S&P 500 Index rose less than 0.05 percent.
Currencies: The Bloomberg Dollar Spot Index rose 0.2 percent, the largest advance in more than a week. The euro declined 0.4 percent to USD1.1929, the biggest fall in more than a week. The British pound climbed 0.1 percent to $1.2926.
BONDS: The yield on 10-year Treasuries climbed one basis point to 2.14 percent. Germany’s 10-year yield increased two basis points to 0.36 percent. Britain’s 10-year yield gained two basis points to 1.025 percent, the largest advance in more than a week.
COMMODITIES: West Texas Intermediate crude dipped 0.6 percent to $46.15 a barrel, the lowest in almost six weeks. Gold rose less than 0.05 percent to $1,309.52 an ounce. Gasoline for September delivery rose 5.7 percent to $1.8845 a gallon.
ASIA: The Topix index rose 0.6 percent at the close in Tokyo and the Kospi index added 0.3 percent. Australia’s S&P/ASX 200 Index was flat. Read here why the Aussie equity market can’t catch a break. The Hang Seng Index in Hong Kong climbed 1.2 percent, while the Shanghai Composite Index fluctuated before edging lower. The MSCI Asia Pacific Index rose 0.1 percent. The Japanese yen fell 0.3 percent to 110.09 per dollar. Samuel Potter, Bloomberg
