Yen, Gold Rise on Korea Worry; Asia Stocks Rebound

EghtesadOnline: Geopolitical concerns loomed over some financial markets for a second day, as saber-rattling over North Korea’s nuclear weapons program sent the yen and gold higher. Asian stocks staged a turnaround.

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05 July 2017

Japanese and Hong Kong equities reversed early declines, led by gains in automakers and technology companies. The yen climbed with gold for a second day after North Korea’s missile launch fanned concern the country is closer to building a device capable of hitting the U.S. Oil retreated after climbing for eight straight sessions. U.S. equity and bond markets are set to reopen after the July 4 holiday.

According to Bloomberg, North Korean leader Kim Jong Un’s actions further escalate tensions over his nuclear ambitions and show how efforts to rein him in -- from international sanctions to U.S. and Chinese pressure -- have not worked. The U.S. confirmed the rocket launched on July 4 was an intercontinental ballistic missile, with Secretary of State Rex Tillerson calling it a “new escalation of the threat” to the U.S. and its allies that would be brought before the United Nations Security Council.

Markets in the past have shown a capacity to quickly move beyond periods of tension on the Korean peninsula following short bouts of risk aversion. Political turmoil on the Korean peninsula comes ahead of the G-20 summit in Hamburg this week as the United Nations Security Council prepares to host an emergency meeting Wednesday.

Elsewhere, the Federal Reserve is due to release minutes from its June policy meeting, the latest clues for investors on the path for U.S. interest rates ahead of Friday’s key jobs report. Equity investors this year have put their faith in a global economic recovery, helping spur all-time highs in global stocks, whereas bond buyers appear less sanguine on the outlook, doubting Fed rate-hike plans.

What’s coming up:

American employers probably added around 175,000 workers in June and wage growth probably strengthened, consistent with a solid labor market, economists project the U.S. Labor Department to report on Friday.

U.S. President Donald Trump will attend the G-20 summit and is expected to hold his first meeting with Russia’s Vladimir Putin as well as meet his Chinese counterpart Xi Jinping.

These are the main moves in markets:

Currencies

The yen was up 0.2 percent to 113.11 per dollar as of 1:25 p.m. in Tokyo, after climbing as much as 0.6 percent during Tuesday’s session. The Korean won added 0.2 percent.

China’s offshore yuan rose 0.2 percent, after falling during the previous two sessions.

The Australian dollar was at 76.15 U.S. cents, up 0.1 percent, after tumbling 0.7 percent Tuesday in the wake of the Reserve Bank of Australia’s decision to maintain a neutral policy stance.

The Bloomberg Dollar Spot Index retreated 0.1 percent. The British pound and the euro added 0.1 percent.

Commodities

Gold advanced 0.3 percent to $1,227.47 an ounce following its 0.3 percent climb Tuesday.

WTI crude slipped 0.2 percent to $46.97 a barrel. Oil has rallied more than 10 percent after falling into a bear market last month.

Stocks

Australia’s S&P/ASX 200 Index fell 0.4 percent after soaring 1.8 percent Tuesday.

Japan’s Topix index advanced 0.4 percent, erasing an earlier loss, with Subaru Corp. rallying 3.4 percent and Toyota Motor Corp. jumping 1.4 percent. South Korea’s Kospi Index rose 0.1 percent after swinging between gains and losses earlier in the session.

Hong Kong’s Hang Seng climbed 0.4 percent as Geely Automobile Holdings Ltd. rebounded 1.5 percent. The Hang Seng China Enterprises Index rose 0.3 percent. The Shanghai Composite Index rose 0.2 percent.

Futures on the S&P 500 Index were little changed. The gauge rose 0.2 percent Monday in a shortened session before the July 4 holiday. The Stoxx Europe 600 Index fell 0.3 percent Tuesday after rallying 1.1 percent during the previous session.

Bonds

The yield on 10-year Treasuries fell two basis points to 2.33 percent. The rate rose five basis points Monday, after surging 16 basis points last week. The market was closed Tuesday.

Australian 10-year yields rose two basis points to 2.64 percent, after dropping five basis points in the previous session.