Global Stocks Poised for Weekly Declines

By Justin Yang and Kenan Machado Features Dow Jones Newswires

Global stocks fall on further North Korea rhetoric

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-- Wall Street poised for another lower opening

-- Haven assets rise

Stocks around the world slid again Friday following an escalation of threats between the U.S. and North Korea, while investors contemplated an array of macroeconomic uncertainties.

The Stoxx Europe 600 was down 1% in afternoon trade, while futures signaled the S&P 500 would open down 0.2% and the Dow Jones Industrial Average would open 0.1% lower.

The Dow closed down 205 points Thursday, in its biggest decline since May 17, after U.S. President Donald Trump rejected criticism that his threats to release "fire and fury" had been too inflammatory. Instead, he said his statement "maybe wasn't tough enough."

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"Clearly the market's taken a bit of a black eye," said Fahad Kamal, senior market strategist at Kleinwort Hambros, commenting on how the markets reversed course after a strong start this week.

The U.S. blue-chip index is down 1.1% this week and the S&P 500 is 1.6% lower, facing its worst weekly performance since November.

Appetite for haven assets continued to support gold, which rose 0.2% Friday to $1,293 a troy ounce. The precious metal was up 2.3% on the week.

The yield on U.S. 10-year Treasurys slid to 2.199% Friday from 2.211% Thursday. Yields move inversely to prices.

"This situation is beginning to develop into this generation's Cuban missile crisis," said ING's Robert Carnell in a morning note to clients.

The CBOE Volatility Index -- a measure of investors' expectations for swings in the S&P 500 over the next 30 days -- surged 44% to 16.04 Thursday -- its highest level since U.S. Election Day. The index has rocketed 70.6% this week.

The rising tensions and the typical late-summer slowdown in trading proved to be an opportunity for investors who have logged strong 2017 gains to pull back and wait.

"Given the great run we've had, seems like some sort of pullback wouldn't be surprising," said Michael Baele, managing director of investments at U.S. Bank Private Wealth Management.

Apart from the war of words between North Korean Leader Kim Jong Un and Mr. Trump, the market faces fresh uncertainties from central banks and politicians in the second half of 2017.

The Federal Reserve's hint about unwinding balance sheets, the possibility of the European Central Bank tapering stimulus and the looming debate about the U.S. debt ceiling in the fall challenge the market's recent performance, Mr. Baele said.

"There's a lot of unknowns out there; we're past the good news of earnings," he said.

The U.S. consumer-price index, set for release before Wall Street opens, will be closely monitored by investors for clues on inflation and the Fed's next move, said Mr. Kamal. Thursday's producer-price index came out tepid, analysts said.

In Asia, benchmarks in Hong Kong and South Korea -- which had been one of the best performers of 2017 -- closed down 2% and 1.7% respectively, Friday, putting the week's drop at 2.5% and 3.2%.

Korea's Samsung Electronics fell 2.8% Friday and was down 6.1% on the week. China's Tencent Holdings, whose surge of about 70% in 2017 was key to the Hang Seng's gains, fell 4.9% Friday.

Despite the drop, markets have shown resilience, with Korea's Kospi still up 14.5% in 2017. The Hang Seng is up 22% for the year.

When Japanese traders get back to their desks Monday, stocks will need to catch up with Friday's regional weakness and the yen's recent gains against the dollar, up 1.5% on the week. The WSJ dollar index, which measures the greenback against a basket of currencies, was flat.

Kevin Kingsbury

contributed to this article.

Write to Justin Yang at justin.yang@dowjones.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

August 11, 2017 09:01 ET (13:01 GMT)