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Treasury Yields and Dollar Slip as North Korea Launches Over Japan

Posted by Joseph Trevisani on Aug 29, 2017 1:35:55 PM

North Korea fired a ballistic missile over Japan's northern island of Hokkaido reigniting tensions over the nation's nuclear and weapons programs just days after retreating from a threat to the U.S. territory of Guam.

Treasury and government bond yields fell around the globe, the dollar receded and gold surged in a typical switch to risk averse assets. 

The U.S. 10-year bond return was down two basis point to 2.13 percent at 12:23 pm in New York, it had been down as much as 5 points. The 2-year was off less than a point to 1.32 percent having shed two points earlier.  Germany's 10-year Bund yield lost four points to 0.34 percent, have reached a two month low earlier in the session. The U.K. 10-year gilt finished half a point lower at 1.0 percent and the French 10-year slipped just under half a point to 0.66 percent. 

The U.S. Dollar had recovered most of its earlier losses by early afternoon but it remained marginally lower against the euro, the sterling and the yen, and higher versus the Canadian Dollar. The Swiss Franc profited most from the renewed concerns in Asia improving half-a-percent against the American currency to its best level in almost three years.  The euro had climbed as high at 1.2072, its best in almost three years and the pound touched 1.2979 it’s strongest in two weeks. 

Gold had given back most of its initial European market surge from yesterday's close at $1, 1315.30 to $1,131.20. By 12:45 pm in New York the precious metal was trading   $1, 319, and 40 up $5.40.

"Japan called Kim Jong Un’s latest provocation an “unprecedented, grave and serious threat,” and asked the United Nations Security Council to hold an emergency meeting, while President Donald Trump said the U.S. will consider “all options” in the its response”, according to Bloomberg.

European equities declined with the London FTSE dropping 0.8 percent, the most in almost three weeks and the German DAX decreased 1.4 percent, having dropped to its lowest in six months earlier. 

American stocks took sharp losses initially with the Dow plunging over 100 points at the open and the S&P 500 slipping eight but by 1:15 pm the Dow had recovered to be ahead by eight points, the larger S&P remained down by less than a point. 

In Texas, Hurricane Harvey now a tropical storm with 45 miles-per-hour winds moved off to the northwest sparing Houston and the U.S oil refineries a second bout of wind damage though rain remained a threat to most to the Gulf Coast. 

West Texas Intermediate, responding to the ebbing danger to the oil industry production and refinery capacity,  and which had traded as high at $48.41 on Friday moved at $46.21 in afternoon action, having been as high as $46.94  on the day.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets

Charts: Bloomberg, WWM Alpha Trader

Euro (hourly)

eur aug 29.png

U.S. 10-Year Yield

 10 aug 29.png

Gold

gold aug 29.png

WTI

wti aug 29.png

 

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