Indices dipped across Asia following a late-Tuesday selloff in U.S. markets over escalating tensions between the United States and North Korea. The risk-off trading saw rises in the yen and gold, while U.S. Treasuries edged higher.
Japan’s Topix saw it’s biggest slide since May 18, followed by South Korea’s benchmark index losing over 1 percent in Wednesday trade. European indices also sagged, with nearly every sector of the Stoxx Europe 600 index declining following harsh threats traded between N. Korean president Kim Jong Un and U.S. President Trump.
North Korean state-run KCNA news agency reported that North Korea was “carefully examining an operational plan” for targeting Guam with “enveloping fire” using a medium-to-long range ICBM, after Trump warned earlier in the day that any provocation would be “met with fire, fury, and frankly, power, the likes of which this world has never seen before” after a Washington Post report that claimed Pyongyang was capable of building a nuclear weapon able to fit inside a long range missile.
Volatility Spike
Yesterday’s spat between Trump and Kim Jong Un caused volatility indicators across the world to spike, as the renewed tensions between the USA and North Korea coincide with markets hitting all time highs, while uncertainty looms over the availability financial safety nets from the Fed and ECB.
“The market is realizing that economies are doing well enough for both the Fed and the ECB to remove stimulus,” Ken Peng, a Hong Kong-based investment strategist at Citi Private Bank, said. “This is going to make a lot of people a bit more nervous about liquidity. In that environment, these geopolitical headlines will have more impact, more punch. The talk is more intense than what it used to be.” –Bloomberg
Escalating tensions between the U.S. and North Korea couldn’t come at a worse time for top-heavy markets. Let’s hope cooler heads prevail.
“The market is realizing that economies are doing well enough for both the Fed and the ECB to remove stimulus”
If history repeats, then we are coming to another Roaring 20’s-like economic period before it all crashes. Not a ‘Golden Age’ as Scott Adams is suggesting, but more of a ‘Golden Afternoon’ before the Age of Robots is upon us.
When MSM is reporting that markets (as in equities) are doing well, it’s time to look at the bubble in bonds and hunker down….cuz this sucker is going down.