ibusinesslines.com August 20, 2017

S&P falls 1.4% in safety flight on North Korea tensions

12 August 2017, 06:32 | Kelvin Horton

Daily September U.S. Dollar Index

U.S. Dollar Index

Tensions with North Korea appear to have finally shaken the confidence of U.S. investors, after the S&P 500 opened 0.8% lower, threatening to end its 15-day streak with a closing streak of more than 0.3%, a 90-year record. The S&P 500 index was down 18.45 points to 2,455.57 and the Nasdaq composite index was down 68.32 points to 6,284.01.

A Labor Department report showed its producer price index posted a surprise drop in July, down 0.1% for the largest slide in nearly a year. Economists had expected prices to rise by 0.2%. Core prices had also been expected to climb by 0.2%.

Traders took heart in a measure of US consumer prices that increased only slightly in July, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year.

In his latest warning to North Korea, U.S. President Donald Trump said on Friday military solutions were "fully in place" and referred to American weapons as being "locked and loaded" should the nuclear-armed nation act "unwisely". Earlier in the week, Trump said the USA would unleash "fire and fury" on North Korea if it continued to threaten the U.S.

"Today's inflation data put the Fed on pause and really diminishes the fact that there's still some noise going around with the North Korea-U.S. situation", said Phil Blancato, CEO of Ladenburg Thalmann Asset Management.

Mattis said North Korea must stop isolating itself and "stand down" in its pursuit of nuclear weapons, and Pyongyang "should cease any consideration of actions that would lead to the end of its regime and the destruction of its people". Those losses dragged the S&P 500 down 1.5% for the week, its worst such showing since the week ended March 24. Genesee & Wyoming (GWR) is posting a notable gain after reporting an increase in July traffic. The stock lost 78 cents to $3.93.

Capital Economics told clients: "Rising steel prices aside, broader price pressures appear to have cooled last month".

Investors bid up technology sector shares.

Trucking and software stocks are also seeing notable strength in mid-day trading, while steel stocks have moved sharply lower on the day.

Still, the market has had several fits and starts over the past few months. South Korea's Kospi lost 1.7 percent, while Hong Kong's Hang Seng slid 2 percent. Japan was closed on a public holiday.

The major European also saw further downside on the day.

The FTSE 100 closed the day lower, giving back just over 44 points or 0.59% to 7,498.06, with the FTSE 250 down 0.37% at 19,875.03.

In the bond market, treasuries are extending the upward move seen over the two previous sessions.

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