Global Stocks Rise as North Korea Backs Off -- Update

By Ese Erheriene and Suryatapa Bhattacharya Features Dow Jones Newswires

Global equities continued to rebound from their late-week slide Tuesday as the temperature cooled between the U.S. and North Korea.

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Following days of escalating diplomatic rhetoric between Donald Trump and Kim Jong Un, state television reported the North Korean leader had opted not to use aggression against the U.S. territory of Guam.

"Investors have once again stepped in, in search of returns, as the tensions surrounding North Korea seemingly dissipated," said Jingyi Pan, a market strategist at IG. "Asian markets are expected to find sustained confidence in buying the dip today."

The rebound started Monday in Asia before carrying through to Europe and the Americas. That included the S&P 500 logging its best one-day gain since April at 1%. The gain is poised to extend in the U.S. as well Tuesday with S&P futures up 0.3%.

With South Korean markets closed for Independence Day, Japan led the way higher in Asia on Tuesday. The Nikkei was up 1.2% in afternoon trading, following a holiday-delayed 1% drop Monday and amid a continued pullback in the yen after last week's jump. The dollar was recently 0.5% higher at Yen110.15, its best level in nearly a week.

Monday's other regional laggard, Taiwan, was also outperforming on Tuesday. The Taiex followed a 1% decline with a 0.7% advance amid a rebound in big tech stocks. Benchmarks in Australia and New Zealand were also up about 0.7%, with the latter looking for its latest record closing high.

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Improved risk appetite also added to downward pressure on gold. The metal, considered a safe store of value in times of uncertainty, snapped a three-session winning streak on Monday and the London spot price was recently down 0.5%. Risk-on sentiment was also being reflected in longer-dated Japanese debt, yields of which rose modestly Tuesday.

One weak point in Asian equities was energy stocks following a 2.5% slide in oil futures overnight, the biggest drop in five weeks. Although crude prices were up slightly in Asian trade Tuesday, the S&P/ASX 200's energy subindex slid 1.1% and China Petroleum & Chemical fell 1.9% in Hong Kong.

"It is becoming clear that markets remain unconvinced over [the Organization of the Petroleum Exporting Countries'] ability to rebalance the saturated markets," said Lukman Otunuga, a research analyst at FXTM.

Write to Ese Erheriene at ese.erheriene@wsj.com

-- Cooling Korea tensions lift stocks

-- Nikkei leads gains in Asia

-- Wall Street futures point to opening gains

Global equities continued to rebound from their late-week slide Tuesday as tensions eased between the U.S. and North Korea.

Following days of escalating diplomatic rhetoric between Donald Trump and Kim Jong Un, state television reported the North Korean leader had opted not to use aggression against the U.S. territory of Guam.

The Stoxx Europe 600 rose 0.3% in the early minutes of Tuesday morning trade, while futures signaled Wall Street was poised to open higher.

The rebound started Monday in Asia before carrying through to Europe and the Americas. That included the S&P 500 logging its best one-day gain since April at 1%.

Markets will shrug off events like the North Korea tensions so long as interest rates continue to stay low, the labor market stays strong and the global economy stays healthy, said Dan Miller, director of equities at GW&K Investment Management.

"The stock markets should continue on its merry way. Things like North Korea or events in Virginia over the weekend, the market tends to look past those events," he said.

The Federal Reserve will release minutes from its last meeting Wednesday, giving investors clues on the central bank's plans for interest rates during a time when inflation has stayed low. The market will also go through the document for further information on the central bank's planned balance sheet unwinding.

With South Korean markets closed for Independence Day, Japan led the way higher in Asia on Tuesday. The Nikkei was up 1.1% in afternoon trading, following a holiday-delayed 1% drop Monday. The dollar was recently 0.7% higher against the yen.

Monday's other regional laggard, Taiwan, was also outperforming on Tuesday. The Taiex followed a 1% decline with a 0.8% advance amid a rebound in big tech stocks. The Australian benchmark was up 0.5%.

Improved risk appetite added to downward pressure on gold. The metal, considered a safe store of value in times of uncertainty, was up 0.8%.

Suryatapa Bhattacharya contributed to this article.

Write to Ese Erheriene at ese.erheriene@wsj.com

(END) Dow Jones Newswires

August 15, 2017 03:50 ET (07:50 GMT)