HONG KONG: President Donald Trump’s apocalyptic warning of “fire and fury” retaliation over North Korea’s weapons programme saw the dollar plummet against the yen Wednesday, with Tokyo stocks in turn sharply down by the break.
The greenback slid to an eight-week low against the safe haven Japanese currency to below 109.80 yen in morning forex trade as escalating tension about Pyongyang’s nuclear ambitions sent a shiver through markets worldwide and abruptly ended languid summer holiday trading.
In New York, the Dow’s winning streak of nine straight records ended as Trump’s sharp rhetoric tipped US stocks into negative territory after they had earlier climbed on positive economic data.
Hong Kong and Shanghai followed Tokyo lower, with Chinese sentiment also dented by a deadly earthquake in the country’s southwest even as China’s producer price gains held steady on surging commodity prices and resilient demand.
In Seoul, shares were down almost one percent while the won slumped to a three-week low against the dollar as the US president and South Korea’s volatile neighbour dramatically ramped up their war of words.
Trump lashed out after US media reported Pyongyang has successfully miniaturised a nuclear warhead, and tensions spiked yet further when North Korean state media said Pyongyang was considering strikes near US military installations in Guam.
“The uncertainty in the market has been enough to break the (Dow’s) run of gains,” said Greg McKenna, an analyst at AxiTrader.
US equities had been on track for a tenth-straight record session Tuesday and the dollar was initially up after the JOLTS survey showed job openings hit a record in the US last month.
– Positive US jobs data –
McKenna said the data could bolster the Federal Reserve’s plan to start winding in its multi-trillion-dollar bond holdings balance sheet, expected to be announced next month.
“This is Janet Yellen’s favoured labour market indicator and could reinforce Yellen and her colleagues about the path they have set for policy normalisation,” he said.
The positive data helped push the greenback to gains against the euro and the pound Wednesday.
Sydney stocks were up more than 0.5 percent around midday Wednesday as Australia’s biggest bank posted record annual profits.
The Commonwealth Bank of Australia’s profits are closely watched as it is the nation’s top lender and the results provide a guidance on the health of the country’s economy as it transitions away from a dependence on mining.
BHP Billiton and Rio Tinto shares also recovered after mining stocks sank on poor trade data from China, a top global consumer of many raw materials. The data showed export growth in July came in well below expectations after months of steady momentum.
US crude oil was trading below $49 to the barrel amid speculation stockpiles may rise once the summer period of higher demand ends.
But Chris Weston, chief market strategist at IG Markets, said signals around oil production were “messy”.
The US Energy Information Administration raised its 2017 and 2018 US crude output estimates to 9.9 million and 9.33 million barrels a day respectively, Weston said, but “on the other hand, we are hearing the UAE, Kazakhstan and Iraq will fully comply with the OPEC agreement” to cut oversupply.