The yen weakened and gold halted its advance amid efforts from U.S. officials to tamp down fears of imminent nuclear war with North Korea. South Korean, Australian and Hong Kong shares rallied, while equities in Tokyo declined as traders returned from holidays during which markets sold off. U.K. futures also indicated a higher open. Bitcoin rose in early Asian trading, and is now about 20 percent since Wednesday.
According to Bloomberg, volatility gauges soared last week after markets were jolted by the sudden increase in tensions between the U.S. and North Korea. Just a week ago, global equities reached all-time highs on expectations for a sustained global recovery in the face of tighter U.S. monetary policy. The latest reading on core prices showed a below-forecast rise, making it tougher for the Federal Reserve to stay on its tightening course.
There was a mixed bag of data out of Asia on Monday. Japan’s second-quarter growth topped estimates, reflecting better domestic demand. China’s economy posted its worst showing this year as curbs on property, excess borrowing and industrial overcapacity began to bite. Factory output increased 6.4 percent from a year earlier, missing a 7.1 percent median estimate and against 7.6 percent in June. Retail sales decelerated to 10.4 percent from an 11 percent pace in June.
Attention now turns to earnings results from China’s Internet titans, Tencent Holdings Ltd. and Alibaba Group Holding Ltd.
Central Intelligence Agency Director Mike Pompeo and national security adviser H.R. McMaster, in separate Sunday talk show appearances, said there’s no indication war will break out. Days after Trump said military options against North Korea were “locked and loaded,” General Joseph Dunford, chairman of the U.S. Joint Chiefs of Staff, plans to meet with South Korean President Moon Jae-in on Monday.
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Here are the main moves in markets:
Stocks
- Japan’s Topix index fell as much as 1.3 percent and was 0.9 percent lower as of 2:29 p.m. in Tokyo. South Korea’s Kospi index advanced 0.6 percent. Australia’s S&P/ASX 200 Index rose 0.7 percent. In Hong Kong, the Hang Seng Index gained 1 percent, while the Shanghai Composite Index rose 0.8 percent.
- Futures on the S&P 500 Index added 0.3 percent. The underlying gauge rose 0.1 percent on Friday, paring its weekly slide to 1.4 percent, the most since March. U.K. futures also indicated a higher open.
- The MSCI All-Country World Index sank 1.6 percent last week after hitting a fresh all-time high on Aug. 7.
- The CBOE Volatility Index, know as the VIX, climbed 55 percent last week.
Currencies
- The yen dropped 0.4 percent to 109.58 per dollar, while the Bloomberg Dollar Spot Index advanced 0.1 percent. That follows a 0.3 percent slide in the dollar index on Friday, sparked by the latest CPI report.
- The euro was at $1.1815.
- The Aussie bought 78.92 U.S. cents, pulling back after the China data.
Bonds
- The yield on 10-year Treasuries rose two basis point to 2.21 percent.
- The Australian 10-year bond saw its yield rise two basis points to 2.61 percent.
- Germany’s 10-year bund yield dipped three basis points to 0.38 percent on Friday, the lowest in almost six weeks.
Commodities
- West Texas Intermediate crude fell 0.1 percent to $48.76 a barrel after sliding 1.5 percent last week.
- Gold lost 0.2 percent to $1,287.25 an ounce after jumping 2.4 percent last week.