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Markets slide after North Korea fires missile over Japan - business live | Markets slide after North Korea fires missile over Japan - business live |
(35 minutes later) | |
8.39am BST | |
08:39 | |
The rise of gold through the $1300 an ounce barrier - which had proved resistant for some while - is likely to lead to continued support for the precious metal, analysts believe. Hussein Sayed, chief market strategist at FXTM, said: | |
Gold seems to have benefited from the tensions [following the North Korea missile launch], currently trading at a nine-month high. However, most of the gains in the precious metal occurred before the missile launch, meaning that there are different factors supporting prices. U.S. 10-year Treasury bond yields have been falling since 10 July, with total declines of 10.8%. This partially explains gold’s 8.6% surge since then, and investors are still not buying Trump’s tax reforms. Yields should be much higher than current levels, especially since the Fed didn’t seem to back off on raising rates. | |
Gary Cohn, head of Trump’s National Economic Council, has a high probability of replacing Janet Yellen when her term ends by January 2018. Cohn is not only expected to back financial sector deregulation, but also to keep interest rates low in order to support the implementation of Trump’s pro-growth economic policies. This provides another valid reason to purchase the yellow metal. With ongoing geopolitical tensions, the looming debt ceiling, threats to scrap Nafta, and a low yield environment, gold prices are likely to remain well supported. $1,300 has been a critical resistance level since the beginning of the year, with four failing attempts to break through; after yesterday’s surge however, $1,300 will likely turn into support. | |
8.24am BST | |
08:24 | |
Julia Kollewe | |
Back with the UK economy, and some weak housing market figures. My colleague Julia Kollewe has the details: | |
UK house prices dipped this month, dragging down the annual growth rate, in further evidence of a cooling market. | |
The average price of a home fell 0.1% between July and August to £210,495, according to Nationwide, Britain’s biggest building society. Prices rose in July and June but fell between March and May, the first time this had happened since the financial crisis. | |
The latest monthly price drop took the annual growth rate back down to 2.1%, a level last seen in May, which was the lowest rate in four years, from 2.9% in July. | |
Robert Gardner, Nationwide’s chief economist, said: “The slowdown in house price growth to the 2-3% range in recent months from the 4-5% prevailing in 2016 is consistent with signs of cooling in the housing market and the wider economy.” | |
He noted that economic growth had halved from last year to about 0.3% per quarter in the first half of this year and that the number of mortgages approved for house purchase hit a nine-month low in June, while surveyors had reported softening in the number of new buyer inquiries. | |
He said in some respects the slowdown in the housing market was surprising, given the strength of the labour market, while mortgage rates have remained close to all-time lows. | |
But household finances are under mounting pressure, with the cost of living rising steadily as the weak pound bites, and wage growth stagnating. | |
The full report is here: | |
Updated | |
at 8.43am BST | |
8.13am BST | |
08:13 | |
Insurers fall on Hurricane Harvey cost fears | |
With the costs of Hurricane Harvey estimated to be anywhere between $10bn and $20bn, insurers have come under pressure. | |
Lancashire Holdings is down more than 2%, Beazley has fallen 1.6% and Hiscox is 1% lower. | |
Updated | |
at 8.38am BST | |
8.08am BST | 8.08am BST |
08:08 | 08:08 |
European markets open sharply lower | European markets open sharply lower |
In the wake of the concerns about North Korea firing a missile over Japan, Europe’s stock markets are on the slide in early trading. | In the wake of the concerns about North Korea firing a missile over Japan, Europe’s stock markets are on the slide in early trading. |
The FTSE 100 has fallen by 1%, Germany’s Dax and France’s Cac are both down 0.9% and Italy’s FTSE MIB has fallen 0.5%. The European Stoxx 600 has hit a six month low. | The FTSE 100 has fallen by 1%, Germany’s Dax and France’s Cac are both down 0.9% and Italy’s FTSE MIB has fallen 0.5%. The European Stoxx 600 has hit a six month low. |
8.05am BST | 8.05am BST |
08:05 | 08:05 |
French economy grows again | French economy grows again |
France’s economy grew by 0.5% in the three months to June, in line with the initial estimates and analyst forecasts. | France’s economy grew by 0.5% in the three months to June, in line with the initial estimates and analyst forecasts. |
This is the third quarter in a row that the country’s GDP has increased by that amount. Exports bounced back, imports slowed significantly and domestic demand held firm, said statistics agency Insee. But corporate investment decelerated sharply, up by 0.7% after a previous rise of 1.3%. | |
Updated | |
at 8.39am BST | |
7.53am BST | 7.53am BST |
07:53 | 07:53 |
Of course the US president has other things on his plate too. There is his tax overhaul speech on Wednesday, but there is also the problem of the debt ceiling and Trump’s threat last week to shut down the government if he does get funds for his Mexican border wall. | |
The arrival of Hurricane Harvey and the cost of repairing the damage will only put more pressure on the country’s finances, and will not help Trump’s attempts to fund his pet project. CMC’s David Madden says: | |
Traders are looking ahead to Donald Trump’s speech on Wednesday, where he is going to talk about bringing in tax reform, and investors are certainly in favour of the President’s pro-business policies, but will the plans get introduced. Mr Trump failed to overhaul the healthcare system, and it wasn’t just the Democrats who scuppered his plans, members of his own party opposed it too. | Traders are looking ahead to Donald Trump’s speech on Wednesday, where he is going to talk about bringing in tax reform, and investors are certainly in favour of the President’s pro-business policies, but will the plans get introduced. Mr Trump failed to overhaul the healthcare system, and it wasn’t just the Democrats who scuppered his plans, members of his own party opposed it too. |
What benefits the President, is that tax reform is the sort of policy that you could imagine support coming from both parties. | What benefits the President, is that tax reform is the sort of policy that you could imagine support coming from both parties. |
Keeping with US politics, the debt ceiling is looming and Mr Trump has already warned the US government that it risks being shut down if it can’t find the funds to build the wall along the Mexican border. The timing of Hurricane Harvey is adding to the problems as Washington will have to deal with those costs too. Investors are nervous about the potential political gridlock in the US. | Keeping with US politics, the debt ceiling is looming and Mr Trump has already warned the US government that it risks being shut down if it can’t find the funds to build the wall along the Mexican border. The timing of Hurricane Harvey is adding to the problems as Washington will have to deal with those costs too. Investors are nervous about the potential political gridlock in the US. |
Updated | |
at 8.40am BST | |
7.48am BST | 7.48am BST |
07:48 | 07:48 |
President Trump’s response so far to the latest North Korean missile has been fairly measured but investors will be watching what he says or does next. Konstantinos Anthis at ADS Securities says: | |
Stock traders are concerned that if the situation escalates even further then the markets will look for risk-off assets taking bets off the equities. The US futures are also pointing towards a bearish opening and the important question now is what President Trump’s response is going to be: if the US President opts for a tempered response then stock traders will breathe a sigh of relief but on the opposite case a sharp sell-off can drive the equity indices down to their recent lows. | Stock traders are concerned that if the situation escalates even further then the markets will look for risk-off assets taking bets off the equities. The US futures are also pointing towards a bearish opening and the important question now is what President Trump’s response is going to be: if the US President opts for a tempered response then stock traders will breathe a sigh of relief but on the opposite case a sharp sell-off can drive the equity indices down to their recent lows. |
Updated | |
at 8.41am BST | |
7.43am BST | 7.43am BST |
07:43 | 07:43 |
Agenda: Investors nervous amid new geopolitical tensions | Agenda: Investors nervous amid new geopolitical tensions |
Good morning, and welcome to our rolling coverage of the latest news from the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the latest news from the world economy, the financial markets, the eurozone and business. |
News that North Korea had fired a missile over Japan has rattled stock markets, after a calmer period when it looked as though the belligerent words and actions from Kim Jong-un had petered out. | News that North Korea had fired a missile over Japan has rattled stock markets, after a calmer period when it looked as though the belligerent words and actions from Kim Jong-un had petered out. |
Japanese prime minister Shinzō Abe called the missile launch an “unprecedented and grave threat” to the country’s security, and both he and US president Donald Trump have vowed to ramp up the pressure on North Korea. | Japanese prime minister Shinzō Abe called the missile launch an “unprecedented and grave threat” to the country’s security, and both he and US president Donald Trump have vowed to ramp up the pressure on North Korea. |
But after the initial reaction, traders recovered some of their nerves. The Nikkei 225 is down 0.47%, while the Hang Seng is 0.27% lower. European markets are forecast to be a bit worse off at the open: | But after the initial reaction, traders recovered some of their nerves. The Nikkei 225 is down 0.47%, while the Hang Seng is 0.27% lower. European markets are forecast to be a bit worse off at the open: |
Our European opening calls:$FTSE 7362 -0.53%$DAX 12066 -0.48%$CAC 5049 -0.61%$IBEX 10222 -0.62%$MIB 21587 -0.64% | Our European opening calls:$FTSE 7362 -0.53%$DAX 12066 -0.48%$CAC 5049 -0.61%$IBEX 10222 -0.62%$MIB 21587 -0.64% |
David Madden,analyst at CMC Markets UK, said: | David Madden,analyst at CMC Markets UK, said: |
Tensions have been running high for a number of weeks now in relation to North Korea, and this move has sent traders running for cover. The situation surrounding North Korea has become more serious now, and we are seeing a risk-off strategy being adopted by traders. | Tensions have been running high for a number of weeks now in relation to North Korea, and this move has sent traders running for cover. The situation surrounding North Korea has become more serious now, and we are seeing a risk-off strategy being adopted by traders. |
There was a knee-jerk reaction to the missile being launched, but after a while traders nerves settled, and we saw a bounce back in equity markets – which are off the lows of the session. | There was a knee-jerk reaction to the missile being launched, but after a while traders nerves settled, and we saw a bounce back in equity markets – which are off the lows of the session. |
As usual in these circumstances, traders were looking for havens and the yen, ironically, the Swiss franc and gold were in demand. Ipek Ozkardeskaya, senior market analyst at London Capital Group, said: | As usual in these circumstances, traders were looking for havens and the yen, ironically, the Swiss franc and gold were in demand. Ipek Ozkardeskaya, senior market analyst at London Capital Group, said: |
Investors rushed to the safe haven assets on Tuesday … the Japanese 10-year yield fell to the lowest level in more than four months. The USDJPY traded at a fresh August low (108.34). Data-wise, the Japanese household spending unexpectedly contracted by 0.2% year-on-year in June. The latest data is bad news for inflation and could have revived the Bank of Japan doves, however the safe haven inflows overshadowed the yen-bears today. | Investors rushed to the safe haven assets on Tuesday … the Japanese 10-year yield fell to the lowest level in more than four months. The USDJPY traded at a fresh August low (108.34). Data-wise, the Japanese household spending unexpectedly contracted by 0.2% year-on-year in June. The latest data is bad news for inflation and could have revived the Bank of Japan doves, however the safe haven inflows overshadowed the yen-bears today. |
As for gold, it climbed to its highest level for nine months, at $1317 an ounce. | As for gold, it climbed to its highest level for nine months, at $1317 an ounce. |
Elsewhere, crude recovered some of its recent losses as Hurricane Harvey continues to do its damage to Texas and the oil production sites located there. Brent is up 0.44% at $52.12, but again the move was less than might have been expected. Ozkardeskaya said: | Elsewhere, crude recovered some of its recent losses as Hurricane Harvey continues to do its damage to Texas and the oil production sites located there. Brent is up 0.44% at $52.12, but again the move was less than might have been expected. Ozkardeskaya said: |
The re-energized Hurricane Harvey continues devastating the Texas-Louisiana border and companies including Exxon Mobil and Motiva are expected to pause their operations, which should be reflected in US oil inventories over the coming weeks and support a minor recovery in oil prices. Gasoline prices are up for the sixth consecutive session. | The re-energized Hurricane Harvey continues devastating the Texas-Louisiana border and companies including Exxon Mobil and Motiva are expected to pause their operations, which should be reflected in US oil inventories over the coming weeks and support a minor recovery in oil prices. Gasoline prices are up for the sixth consecutive session. |
Our live coverage of the hurricane is here: | Our live coverage of the hurricane is here: |
There are also some nerves in the market before Trump’s speech on Wednesday when he is due to announce tax reform plans. These have been one of the key reasons for the market giving the president some leeway despite all the controversy, but there is still doubt as to whether he will be able to push his proposals through Congress. | There are also some nerves in the market before Trump’s speech on Wednesday when he is due to announce tax reform plans. These have been one of the key reasons for the market giving the president some leeway despite all the controversy, but there is still doubt as to whether he will be able to push his proposals through Congress. |
On another thin day for data, we have had the latest Nationwide house price index (of which more shortly) and French GDP is also due soon. | On another thin day for data, we have had the latest Nationwide house price index (of which more shortly) and French GDP is also due soon. |
Updated | Updated |
at 7.53am BST | at 7.53am BST |