The bellicose rhetoric from the US and North Korean officials is the main driver today. We would qualify that assessment by noting that first, the market moves are rather modest, suggesting a low-level anxiety among investors. Second, pre-existing trends have mostly been extended. Â
Turning to Asia first, the Korea’s equity market fell 1.1%. The Kospi has fallen for the past two weeks (~2.2%). Through July it was up eight months in a row. However, as we had noted previously, foreign investors had begun taking some profits since July. In the first six months of the year, foreigners bought nearly $9 bln worth of Korean equities, and here in Q3, they have sold almost $1 bln. The Korean won fell 0.9% today. The US dollar has edged 0.6% higher against the won over the past two weeks. The dollar fell 2.2% against the won in July. Â
The MSCI Asia Pacific Index was off 0.4% today. It has risen once in the past five sessions. The Nikkei suffered a slightly larger decline than the Kospi (-1.3%). The rising yen (the dollar sold through JPY110) may have also weighed on Japanese equities. The Nikkei has fallen for the past three weeks and has posted a decline in five of the past six weeks. Â
The price of gold has risen 0.6% today on top of yesterday’s 0.25% rise. It had fallen 0.9% last week, which ended a three-week advance. The price of gold is up $10 an ounce this week and $27 an ounce since the end of Q2. Â
European shares are lower as well today, with the Dow Jones Stoxx 600 off 0.65% in late morning turnover in Europe. The benchmark rallied 1.1% last week, though it had lost 3.1% in the back-to-back decline in June and July. Financials and materials are the hardest hit today, but all sectors are lower. Â
Bond yields are lower. European 10-year benchmark yields are mostly 3-4 bp lower, while the US 10-year yield is off two bp to dip below 2.24%. Among two-year tenors, the demand for Germany is clear, with the yield off nearly three basis points to 70 bp. Spanish and Italian two-year yields are 1-2 bp higher. Â
