Trump's 'fire and fury'
warning hits stocks, lifts Swiss franc and gold
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[August 09, 2017]
By Nigel Stephenson
LONDON (Reuters) - President Donald Trump's
warning North Korea faced "fire and fury" and Pyongyang's threat of
possible retaliation drove investors out of stocks on Wednesday and into
the safety of the yen, Swiss franc, gold and government debt.
European shares slid, following falls in Asia and on Wall Street. U.S.
stock index futures also fell, with the S&P 500 indicated to open down
0.5 percent <ESc1> <1YMc1>.
The Swiss franc, by contrast, was on track for its biggest single-day
rise in more than 2 1/2 years.
"Trump's comments about North Korea have created nervousness and the
fear is if the President really means what he said: "fire and fury","
said Naeem Aslam, chief market analyst at Think Markets in London.
"The typical text book trade is that investors rush for safe havens."
Trump's remarks on Tuesday that North Korea would face "fire and fury
like the world has never seen" pushed Wall Street lower on Tuesday and
drove up the VIX "fear gauge" of expected volatility on the S&P 500
The VIX rose further on Wednesday, rising as far as 12.11, its highest
in almost a month <.VIX>.
A spokesman for the Korean People's Army said in a statement it was
"carefully examining" plans for a missile attack on the U.S. Pacific
territory of Guam, which has a large U.S. military base.
In Europe, the pan-continental STOXX 600 index <.STOXX> lost 0.9
percent, with falls deepening after reports a car had rammed a group of
soldiers in Paris, injuring six.
France's CAC <.FCHI> dropped 1.8 percent and Germany's DAX <.GDAXI> fell
Tokyo's Nikkei 225 share index <.N225> closed down 1.3 percent at its
lowest since June 1 as the strong yen hit exporters, while South Korea's
KOSPI index <.KS11> fell 1.1 percent to seven-week lows.
South Korea's won currency <KRW=KFTC> dropped 0.9 percent against the
dollar to its lowest close since July 13.
MSCI's main index of Asia-Pacific shares, excluding Japan, was last down
0.6 percent <.MIAPJ0000PUS>. Chinese blue chips <.CSI300> closed flat
but Hong Kong's Hang Seng fell 0.4 percent <.HSI>.
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Traders work in front of the German share price index, DAX board, at
the stock exchange in Frankfurt, Germany, August 7, 2017.
Instead, investors turned to the traditional safe-haven assets sought in
troubled times, the Japanese yen strengthened 0.5 percent to 109.73 to
the dollar <JPY=>.
The Swiss franc reversed a two-week losing streak and gained 1.1 percent
to 0.9611 per dollar <CHF=>. The Swiss currency was also on track for
its biggest daily gain against the euro since the Swiss National Bank
removed its cap on the currency in January 2015.
"Heightened geopolitical risks overnight have seen the markets flip from
risk-on to risk-off and we have to wait and see how long this move runs
before adding some positions," said Viraj Patel, an FX strategist at ING
The dollar index, which measures the U.S. currency against a basket of
major peers, slipped 0.1 percent <.DXY> as U.S. Treasury yields fell.
The euro dipped 0.1 percent to $1.1737 <EUR=> but the single European
currency has been slipping this week against the dollar, having hit a
more than 2 1/2-year high of $1.1892 on Aug. 2.
Yields on core government debt fell. Ten-year U.S. yields dropped 4
basis points to 2.242 percent and German equivalents fell 3 bps to 0.43
percent, a six-week low.
Gold rose 0.6 percent to $1,268 an ounce.
"We've had some competing forces play out over the past 12 hours - the
U.S. dollar was stronger off economic data, but that was quickly
reversed with President Trump's comments about North Korea earlier today
(Wednesday)," said ANZ analyst Daniel Hynes.
Oil prices rose before a report expected to show U.S. crude stocks fell
for a sixth week. Bent crude, the global benchmark, rose 19 cents to
$52.33 a barrel.
(Additionsal repirting by Lisa Twaronite in Tokyo, Nithin Thomas Prasad
in Bengaluru, Saikat Chatterjee and John Geddie in London; Editing by
Matthew Mpoke Bigg and Raissa Kasolowsky)
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