TOKYO
(Reuters) - U.S. stock futures and Asian share markets tumbled on Tuesday,
while the yen jumped to four-month highs against the dollar after North Korea
fired a
missile over northern Japan, fuelling worries of fresh tension between
Washington and Pyongyang.
S&P mini
futures ESc1 fell as much as 0.85 percent on the news before paring losses to
trade 0.55 percent down. On Monday, the index was little changed as investors
tried to assess the fallout from Tropical Storm Harvey.
European
shares are expected to fall, with spread-betters looking at a lower opening of
0.5 to 0.6 percent for Britain’s FTSE .FTSE, France’s CAC .FCHI and Germany’s
DAX .GDAXI.
Japan’s
Nikkei .N225 was down 0.9 percent to a four-month low at one point, then pared
losses to be 0.5 percent off.
South
Korea’s Kospi .KS11 shed as much as 1.6 percent, helping to drag down MSCI’s
broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS 0.6 percent.
“All sectors
are tumbling, which clearly shows that North Korea risks are the reasons behind
it,” said Cho Byung-hyun, a stock analyst at Yuanta Securities in Seoul.
North Korea
fired a missile early on Tuesday that flew over Japan and landed in the Pacific
about 1,180 kilometers (735 miles) off the northern region of Hokkaido, in a
sharp escalation of tensions on the Korean peninsula.
North Korea
has conducted dozens of ballistic missile tests under young leader Kim Jong-Un,
but firing projectiles over mainland Japan is his first.
“The missile
flew across Japan this time, so the implications will likely be a bit different
from previous ones,” said Hirokazu Kabeya, chief global strategist at Daiwa
Securities.
North Korea
threatened earlier this month to fire missiles into the sea near the U.S.
Pacific territory of Guam, a host to major U.S. military installations, after
President Donald Trump warned Pyongyang would face “fire and fury” if it
threatened the United States.
The yen rose
0.8 percent to 108.33 to the dollar, its highest since April, despite Japan’s
proximity to North Korea, and last stood at 108.79.
The yen
tends to benefit during times of geopolitical or financial stress as Japan is
the world’s biggest creditor nation and there is an assumption that Japanese
investors will repatriate funds should a crisis materialize.
The
safe-haven Swiss franc hit a one-month high of 0.9498 franc to the dollar and
last traded at 0.9523 franc on the dollar CHF=, up 0.3 percent. The Swiss
currency gained 0.4 percent versus the euro to 1.1396 per euro EURCHF=.
The euro hit
a its 2 1/2-year high of $1.1986 and last stood at $1.1970 EUR=, maintaining
its uptrend after European Central Bank chief Mario Draghi did not express
concern about the currency’s recent rise in his speech at Jackson Hole.
Gold XAU=
also jumped 0.9 percent to $1,324 per ounce, hitting its highest level since
Nov 9.
Investors
also rushed to the safety of U.S. Treasuries, pushing down the 10-year yield to
a two-month low of 2.122 percent US10YT=RR.
On the other
hand, the South Korean won KRW= retreated 0.8 percent against the dollar to
1,127 won.
“Financial
markets think the only realistic option for the U.S. and North Korea will be to
sit down and talk at some point because other options are too costly for
everyone involved,” said Masayoshi Kichikawa, chief strategist at Sumitomo
Mitsui Asset Management.
“But no one
cannot rule out the risk of accidents. Markets think the chicken game will
continue for now and North Korea will remain a risk,” he added.
However,
North Korea is not the only problem Trump is facing.
Investors
are looking at what will happen to his push for tax reforms. He is expected to
begin a major effort this week to convince the public of the need for them.
He would
also need to work with the Congress to raise the debt ceiling and pass a budget
by the end of next month, and investors expect acrimonious negotiations.
On Monday,
U.S. shares were narrowly mixed as investors tried to assess the damage from
Harvey, the most powerful hurricane to strike Texas in more than 50 years.
Crude oil
prices bounced back a tad on the back of supply disruptions in Colombia and
Libya, a day after U.S. crude futures CLc1 dropped on worries that refinery
shutdowns caused by to the flooding could boost inventory.
U.S. West
Texas Intermediate (WTI) crude futures CLc1 rose 20 cents, or 0.4 percent, to
$46.77 a barrel, after having falling to as low as $46.15 in the previous
session.
U.S.
gasoline price RBc1, which surged as much as 7 percent to a two-year peak of
$1.7799 per gallon on Monday, traded at $1.7381 in early Tuesday trade.
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