Stocks dip as North
Korea, France keep investors on edge
Send a link to a friend
[April 18, 2017]
By Nigel Stephenson
(Reuters) - European shares fell and the dollar dipped against the yen
on Tuesday as tensions over North Korea and the coming weekend's
knife-edge presidential election in France kept investors nervous.
Low-risk government debt, a favored investment in uncertain times, was
in demand, while gold held firm close to five-month highs touched on
Monday, the day after a failed ballistic missiles test by Pyongyang.
Turkey's lira rose against the dollar after Turkish President Tayyip
Erdogan rejected Western criticism of a referendum in which he won
sweeping new powers.
With market activity reduced in the past week due to Easter holidays,
investors have focused on political factors that also include Syria and
U.S. relations with Russia and China.
European shares fell on their first day of trading since the break. The
pan-European STOXX 600 index <.STOXX>, which hit 16-month highs last
week, was down 0.6 percent, led lower by the basic resources <.SXPP> and
oil and gas sectors <.SXEP> as commodity prices dropped.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> dropped 0.7 percent, while Tokyo's Nikkei <.N225> closed
up 0.4 percent on earlier yen weakness.
The dollar dipped fractionally against a basket of major currencies <.DXY>.
It earlier lifted off five-month lows versus the yen after U.S. Treasury
Secretary Steven Mnuchin told the Financial Times a strong dollar was a
positive in the long term while agreeing with U.S. President Donald
Trump that it hurt exports in the short term.
The greenback traded at 108.88 yen <JPY=>, down less than 0.1 percent on
the day, while the euro was 0.1 percent stronger at $1.0649 <EUR=>.
Investors were also watching trade talks between the United States and
Japan, whose deputy premier, Taro Aso, said the two sides agreed to
combat unfair trade practices.
"There was quite strong thinking in the market that the U.S. would maybe
put pressure on Japan in terms of currency manipulation," said Neil
Jones, head of hedge fund FX sales at Mizuho in London.
Investor nervousness ahead of Sunday's French election made itself felt
in currency and debt markets. French 10-year government bond yields
<FR10YT=TWEB> initially rose while ultra-safe German equivalents
<DE10YT=TWEB> dipped, taking the gap between the two close to six-week
[to top of second column]
A stock quotation board displaying Japan's Nikkei average is seen at
the Tokyo Stock Exchange (TSE) in Tokyo, Japan December 30, 2016.
But French yields later fell and the spread with Germany narrowed to its
tightest since April 13 after an opinion poll put centrist Emmanuel
Macron first in the first round of voting, just ahead of far-right,
anti-euro candidate Marine Le Pen with a bigger gap to far-left
representative Jean-Luc Melenchon.
The cost of hedging against big moves in the euro against both the
dollar and the yen over the next month jumped on Monday to their highest
levels since Britain's vote to leave the European Union <EUR1MO=>
"(Euro government bond) investors are going to be very careful this week
and clearly the only thing that's going to be on their minds is what
happens in France," said Chris Scicluna, head of economic research at
Daiwa Capital Markets.
Implied volatility in the STOXX 600 index hit its highest since early
November 2016 <.V2TX>.
Turkey's lira <TRY=> strengthened 0.4 percent to 3.69 per dollar after
Erdogan's narrow victory in Sunday's referendum.
"The markets are taking this initial result as positive insofar the buck
now stops with one person and in theory political noise should come
down," Greg Saichin, CIO emerging markets fixed income at Allianz Global
Investors said, adding that the next battleground will be the 2019
Oil prices fell after a U.S. government report indicated U.S. shale
production was rising. Brent, the international benchmark crude, fell 29
cents a barrel to $55.07.
Copper was down 0.6 percent at $$5,655 a tonne <CMCU3>
Gold <XAU=> was marginally higher on the day at $1,283 an ounce, having
touched a five-month high of $1,295 on Monday.
(Additional reporting by Nichola Saminather in Singapore, Dhara
Ranasinghe, Ritvik Cravalho and Claire Milhench in London; editing by
[© 2017 Thomson Reuters. All rights
Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.