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The yen and gold consolidated gains after fresh threats from North Korea sent money into haven assets. Stocks declined with U.S. and European equity futures as investors focused on upcoming comments from central bank policy makers.
North Korea had injected a note of caution to markets on Monday after its foreign minister declared that the nation can shoot down U.S. warplanes. Declines among Asian equities were relatively muted as the U.S. continues to pursue denuclearisation through diplomatic channels. Oil traded close to a five-month high after Turkey threatened to shut down Kurdish crude shipments through its territory.
Markets have been oscillating between a risk-on, risk-off stance since early August amid simmering tensions on the Korean Peninsula. Equities have pulled away from recent record highs as the U.S. and North Korea continue to trade threats, and European political risks emerged after the weekend German election that returned Chancellor Angela Merkel with eroded support.
North Korean Foreign Minister Ri Yong Ho described President Donald Trump’s recent comments as tantamount to a declaration of war. The White House denied it has declared war on Pyongyang, while Trump’s national security adviser said the U.S. has four or five different scenarios for how the crisis will be resolved, and “some are uglier than others.” China’s ambassador to the UN told Reuters the situation is "getting too dangerous."
Geopolitics will share center stage with a speech by Federal Reserve Chair Janet Yellen on Tuesday, which will be parsed as policy makers continue to disagree on whether to raise U.S. interest rates again this year. Investors see a roughly 60 percent chance that rates will be increased again in December following moves in March and June.
What to watch out for this week:
Here are the main moves in markets:
Stocks
Currencies
Bonds
Commodities
Source: Bloomberg
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