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12 August 2017, 02:59 | Joann Bryant
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There were further tensions surrounding North Korea on Thursday with the Pyongyang regime claiming that missiles which could be used to target the Pacific island of Guam would be ready to launch by mid-August.
Escalating tensions around Pyongyang's nuclear ambitions sent a shiver through markets worldwide and pushed the dollar to below 109.7 yen in afternoon forex trade to an eight-week low against the safe haven currency, piling more pressure on Japanese stocks.
A small rise in a measure of U.S. consumer prices pointed to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year, which would be favourable to equity investors.
The S&P 500 dropped 1.4% to 2438.21, while the Dow Jones Industrial Average fell 204.69 points, or 0.9%, to 21,844.01. "I'm looking selectively at the pullbacks, but my gut is that we could be in for a bumpy ride for the next couple of months or so".
Financials .SPSY fell the most, down about 1 percent.
USA stocks have risen week after week this year - with the S&P up more than 9 percent - in extremely low volatility, as strong corporate earnings and an improving global economy offset disappointment that President Donald Trump's promises to lower corporate taxes and implement a massive infrastructure spending have so far failed to see the light of day.
"Pretty remarkable, perhaps even extraordinary, considering", said Tim Ash, strategist at fund manager BlueBay. The UK trading session took USD/CHF lower to hit a day low of 0.9630 towards the closing bell, but closed up slightly on the day by 0.03%. The risk-off tone triggered by the increase in tension between the U.S. and North Korea yesterday picked back up during today's U.S. session.
Gold rose to its highest level in nearly two months, while the Swiss franc increased by more than 1% against the United States dollar and saw its biggest one-day gain against the euro in more than two and a half years.
The dollar was further weighed down on Friday by the soft United States inflation data.
The Canadian dollar was trading at an average price of 78.67 cents USA, down 0.04 of a USA cent.
The Korean won also continued to skid, down 0.45 percent to 1,147.2, falling below its 200-day moving average for the first time in a month. Economists had expected prices to rise by 0.2 percent.
In bond markets, the yield on US Treasuries fell, also pressured by the lowered expectations for a Fed move.
Greg McKenna, an analyst at AxiTrader, said the data could bolster the Federal Reserve's plan to start winding in its multi-trillion-dollar bond holdings balance sheet, expected to be announced next month.
Benchmark US 10-year notes last rose 6/32 in price to yield 2.1905 per cent, from 2.211 per cent late on Thursday.
Gold, another classic safe haven asset, was trading at around $1,285 per ounce, up more than two percent this week and near a nine-week high.
Analysts said yields, which move inversely to prices, could fall further if the geopolitical tensions continue to rise - even if central bankers in the U.S. continue to talk of raising interest rates or scaling back stimulus programmes.
U.S. crude rose 0.41 per cent to US$48.79 per barrel and Brent was last at US$52.01, up 0.21 per cent. "Risk aversion is still very much a concern for markets".
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