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Dow plummets 205pts as Trump inflames Korea tension
12 August 2017, 06:02 | Jodi Jackson
Traders work on the floor of the New York Stock Exchange in New York U.S
"Although it is considered highly unlikely that this tension will escalate into a nuclear war, the market still needs to see how President Trump will eventually deal with his advocating "fire and fury" against North Korea's threat", said Margaret Yang Yan, market analyst at CMC Markets Singapore.
Gold got an extra boost after data showed USA consumer prices rose less than expected in July, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year.
The CBOE Volatility Index - a measure of investors' expectations for swings in the S&P 500 over the next 30 days - surged 44% to 16.04 Thursday - its highest level since U.S. Election Day.
The hope that the Fed will have to slow its rate increases appeared to stop, at least for now, the near US$1 trillion loss in world stocks valuations this week triggered by the war of words between Pyongyang and Washington.
On average, the S&P 500 falls 5% or more every 10 weeks and the index falls 10% every 33 weeks, according to data analyzed by AllianceBernstein going back to 1928. The Shanghai Composite Index lost 0.2 percent to 3,275.57 and Hong Kong's Hang Seng was off 0.3 percent at 27,757.09.
The FTSE 100 fell by more than 100 points as global investors continued to act on North Korea-related jitters.
Significant strength was also visible among software stocks, as reflected by the 1.2% gain posted by the Dow Jones Software Index.
Seagate Technology gained 2.3 percent after investor ValueAct disclosed that it had acquired a 7.2 percent stake in the company.
The Swiss franc and Japanese yen are often sought in times of geopolitical tension or global financial stress, partly because both countries have big current account surpluses.
In Europe, France's CAC 40 fell 1.6 percent to 5,135 while Germany's DAX was down 1.3 percent at 12,133.
The dollar was further weighed down on Friday by the soft United States inflation data.
But losses soon resumed, with Tokyo edging down as the Nikkei again came under pressure from the strength of the safe-haven yen, which hit eight-week highs Wednesday against the dollar.
The market was waiting f or USA consumer inflation data on Friday that would offer more clues about future Fed decisions. "There are four more (inflation) prints between now and the December FOMC meeting and we expect the Fed to remain data-dependent, if a touch more cautious", TD Securities said in a note.
The dollar index fell 0.32 per cent, with the euro up 0.42 per cent to US$1.1819.
Barrick Gold Corp rose 2.3 percent to C$21.74 as the price of gold, a safe-haven asset, reached its highest levels in two months.
The Korean story has seen the yen gain around 1.5 percent this week, its biggest rise since mid-May.
The Canadian dollar was trading at an average price of 78.67 cents USA, down 0.04 of a USA cent. "Indeed, the biggest increases in the price of gold have occurred when the United States bombed Libya in 1986, in the wake of the Gulf War in 1990, and, more recently, when ISIS attacks put oil supplies in the Middle East at risk".