Stocks and the dollar fell yesterday while the Japanese yen, gold and sovereign bonds rose after North Korea’s most powerful nuclear test to date dampened investor appetite for risk.
Sunday’s test sparked warnings from Washington and drove South Korea’s stock market 1.2 per cent lower. Japan’s Nikkei lost almost one per cent.
With Wall Street closed for the Labour Day holiday at the start of a week likely to become increasingly dominated by a number of central bank meetings, the fall in European stocks was less marked.
The pan-European STOXX 600 index lost 0.4 per cent, led by a 0.7 per cent fall in banks.
The dollar, down 0.3 per cent against the basket of currencies used to measure its broader strength, fell 0.6 per cent to 109.60 yen, having been as low as 109.22 and off a whole yen from late on Friday. Investors tend to buy the yen in time of political or market tension on expectations Japanese investors will over time repatriate their money.
The Swiss franc, also viewed as a safe place to park money, rose 0.8 per cent to 0.9579 per dollar.
Driven by the Korean losses, MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.7 per cent.
Yields on German government bonds, regarded as among the world’s lowest-risk assets, fell slightly. Benchmark 10-year yields were down 1 basis point at 0.37 per cent while two-year yields dipped a similar amount to minus 0.76 per cent, their lowest since April.
Safe-haven gold was up 0.8 per cent at $1,336 an ounce, having risen to $1,339.47, its highest in nearly a year. European Central Bank policymakers meet on Thursday, with expectations of any major shift towards reining in its bond-buying stimulus programme fading in recent weeks.
The euro’s almost 14 per cent rally against the dollar this year has stalled on signs that ECB officials were growing more concerned with the gains – and might wait far longer to tighten policy as a result.
The euro gained 0.4 per cent but is almost 2 cents below the 2-1/2-year high it hit last week.
The dollar took some support on Friday from a strong ISM report on US factories, which produced the highest reading since April 2011.
That was just the latest sign that global production was gaining traction and added to bullishness on industrial metals. Copper hit $6,920.25 a tonne, its highest in three years.
The metal was last up 1.2 per cent at $6,914.
In the oil market, prices were subdued as shutdowns of US production following Harvey were balanced by an expected downturn in crude demand as the tropical storm knocked out refineries along the Gulf of Mexico.
Brent crude, the international benchmark, fell nine cents to $52.66 a barrel.