Dow slips 100 points as tensions with N.Korea escalate

Donald Trump's stand-off with North Korea is having a bearing on the markets

In his latest warning to North Korea, US 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".

The smaller than expected increase in consumer prices has led to optimism that the Federal Reserve will not be in a hurry to raise interest rates.

Missile makers Raytheon and Lockheed Martin have outperformed Wall Street by nearly four per cent in recent days and the Dow Jones US defence index is at a record high and on a seven-day unbroken run of gains. That lifted the year-on-year increase in the CPI to 1.7% from 1.6% in June.

Subdued U.S. inflation has stirred doubts about the chances of another Fed interest rate hike this year, which have weighed on the dollar.

North Korea went further with its threat to the US by providing detailed plans about how it plans to launch missile strikes on the US-Pacific territory of Guam. Macy's sank 10.3 per cent and Kohl's lost 5.8 per cent.

On the currency markets, the pound was marginally higher against the U.S. dollar at 1.30 and up 0.1% versus the euro at 1.11.

"It looks like it was used as a good excuse to adjust positions", he said, referring to the latest flare-up of tensions between the United States and North Korea.

The Korean won continued to fall versus the dollar, down 0.13 per cent to 1,143.5 on Friday for a 1.6 per cent decline on the week.


The heightened rhetoric dragged London's top flight back from 7,542.73 on Tuesday, when it came within a whisker of reaching the all-time closing high of 7547.63 recorded on May 26 and June 2.

The bigger surprise is that the cost to protect against declines in the kiwi against the USA dollar for one month shot up to the most expensive levels since April.

The Japanese currency is often a safe have asset too.

Data from the U.S. Commodity Futures Trading Commission released last week showed that currency speculators still held a large net short position in the yen during the week ended August 1, although somewhat smaller than the levels seen a couple of weeks earlier, when their bearish bets against the yen grew to the largest since January 2014.

European and Asian equity markets were mostly lower Friday on the back of simmering tensions between the United States and North Korea, but firmer prices on Wall Street helped put a floor under the losses in Europe, dealers said. The euro fell to $1.1728 from $1.1757. "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 market's main backstop in times of strain, gold, hit a two-month high of $1,282 an ounce amid the nervousness.

ENERGY: Benchmark U.S. crude gained 28 cents to $49.84 a barrel in electronic trading on the New York Mercantile Exchange. "Indeed, the biggest increases in the price of gold have occurred when the USA 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".

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