Swiss Franc Consolidates After Rallying Hard on North Korea Tensions

Fire and fury President Trump promises a response

On Thursday, North Korea's state media kept up its anti-U.S. rhetoric, saying the nation will develop a plan by mid-August to launch intermediate-range missiles at Guam. The Stoxx Europe 600 benchmark was down 1% (http://www.marketwatch.com/story/european-stocks-face-worst-week-in-9-months-on-us-north-korea-tensions-2017-08-11), while Hong Kong's Hang Seng led the Asian losses with a drop of 2%. The Japanese markets were closed for a holiday.

David Madden, market analyst at CMC Markets UK, said: "European stocks have suffered greatly today as traders were prompted to cut-and-run due to the escalating tensions between the USA and North Korea".

Those moves came after North Korean leader Kim Jong Un made an explicit threat to strike a USA military base in Guam. Tokyo's Nikkei 225 tumbled 1.3 percent to 19,738.71 while Seoul's Kospi fell 1.1 percent to 2,368.39. Trump's comments came after a Washington Post report that North Korea has built a miniaturised nuclear warhead.

Trump's threat earlier this week, to unleash "fire and fury" on Pyongyang if it attacked, was ultimately dismissed as bluster by many investors. These ranged from an investigation into Russia's possible interference in the 2016 USA presidential election, to concerns about China's risky debt levels, to stubbornly low inflation in the U.S.

The negative headlines provided many investors with an opportunity to pocket some of their recent gains following a string of record highs fueled by strong corporate earnings. The index closed at 16.04 overnight, the highest level since November 8, when Trump was elected president.

The Dow Jones Industrial Average .DJI closed down 204.69 points, or 0.93 per cent, at 21,844.01, the S&P 500 .SPX lost 35.81 points, or 1.45 per cent, to end the session at 2,438.21 and the Nasdaq Composite .IXIC fell 135.46 points, or 2.13 per cent, to 6,216.87.

Neil Mellor, a currency strategist with Bank of New York Mellon in London, said the pound was "drifting towards the lows from last month against the dollar". It was down 0.15 percent at 109.065 yen, after retreating 0.7 percent on Thursday.

"The level which we are looking at now is $1,300".

The latest US CPI data will also be an important market focus on Friday and there will be a constant threat of choppy trading conditions given a lack of liquidity.

Insurers and banks, which invest in higher-yielding products such as foreign bonds, underperformed after U.S. Treasury yields fell on Wednesday, with the yields on the benchmark 10-year note hitting a six-week low. They were at 2.201 percent on Friday.

The yen and gold continued rising, while the Swiss franc took a breather against the dollar (last trading at 0.9660 francs) and the euro, but kept most of its yesterday's hefty gains.

The price of oil was also 0.3% ahead at 52.29 U.S. dollars a barrel, with stockpiles coming under pressure from falling crude oil imports and record processing at American refineries.

Also adding support to gold was disappointing U.S. economic data which reduced the chances of a U.S. Federal Reserve interest rate hike later this year. The dollar was down 1.2 percent at 0.9627 Swiss francs, while an ounce of gold was 1 percent higher at $1,275.

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