European Open Market Briefing – 09/08/2017 – by Arjun Lakhanpal

In Asian Equity Markets Japan’s Nikkei index fell to more than a two-month low on Wednesday morning on escalating geopolitical tensions on the Korean peninsula, which boosted the safe-haven yen and knocked stocks across the board. The Nikkei fell 1.3 percent to 19,739.88 by the midday break, after hitting a low of 19,715.56, the weakest level since June 1. The broader Topix fell 1.3 percent to 1,614.73 and the JPX-Nikkei Index 400 shed 1.2 percent to 14,349.67.  MSCI’s broadest index of Asia-Pacific stocks outside Japan fell 0.7 percent, while South Korean shares fell 0.9 percent. Hong Kong’s Hang Seng Index was off 0.09 percent and the Shanghai Composite fell 0.18 percent.

In Currency Markets the yen gained against the dollar and other peers on Wednesday on the latest bout of geopolitical tensions stemming from the Korean Peninsula.  The U.S. currency was down 0.4 percent at 109.865 yen, following a retreat to 109.835, its weakest since mid-June. The South Korean won sank around 0.8 percent to 1,133.8 to the dollar, its lowest since July 14. The euro edged down 0.1 percent to $1.1735. The Australian dollar, sensitive to shifts in risk sentiment, was down 0.5 percent at $0.7876. Elsewhere, the retreat by the New Zealand dollar continued, with the kiwi hovering near a three-week low of $0.7319. The dollar index was effectively unchanged at 93.633 after touching an 11-day peak of 93.876 overnight.

In Commodities Markets crude futures fell for a third day on Wednesday despite a bigger than expected fall in U.S. oil inventories reported by an industry group, with doubts lingering over OPEC’s ability to restrain supply as promised. Benchmark Brent crude was down 0.5 percent, at $51.90 a barrel. In the previous session, it settled down 0.4 percent. U.S. West Texas Intermediate crude was down 0.3 percent, at $49.02 a barrel, after falling 0.4 percent on Tuesday. Gold gained in Asia on Wednesday as geopolitical tensions on the Korean peninsula hit risk sentiment.  Spot gold rose 0.5 percent to $1,266.20 per ounce. It marked its lowest since July 26 in the previous session at $1,251.01 an ounce.

In US Equity Markets  stocks closed lower on Tuesday after a late afternoon selling spree as investors fled for safety after U.S. President Donald Trump vowed to respond aggressively to any threats from North Korea. The Dow Jones Industrial Average  ended down 0.15 percent, at 22,085.34. The S&P 500 lost 0.24 percent, to close at 2,474.92 and the Nasdaq Composite fell 0.21 percent, to 6,370.46. The financial sector index gave back gains after news California insurance regulator will probe whether Wells Fargo & Co  and an insurance company harmed residents by selling insurance they did not need. Wells Fargo still ended up 0.3 percent. Shares of Michael Kors ended up 21.5 percent, after the luxury goods maker raised its full-year revenue forecast.

In Bond Markets Japanese government bond prices edged up on Wednesday as the latest bout of Korean tensions weakened Tokyo stocks while favouring safe havens such as sovereign debt. The yield on five-year bonds fell half a basis point to minus 0.065 percent and the 20-year yield declined 1 basis point to 0.565 percent. September 10-year JGB futures added 0.12 point to 150.34. JGBs were also supported as the Bank of Japan conducted a regular debt-buying operation, purchasing 770 billion yen ($7 billion) of five- to 40-year bonds on Wednesday. The yield on the benchmark 10-year U.S. Treasury note fell to 2.249 percent from its U.S. close of 2.282 percent on Tuesday.

Economic Calendar

• 15:30 GMT+1 US Crude Oil Inventories
• 22:00 GMT+1 NZD Official Cash Rate
• 22:00 GMT+1 NZD RBNZ Rate Statement
• 23:00 GMT+1 NZD RBNZ Press Conference