LONDON MARKETS: FTSE 100 Slips As Renewed U.S.-North Korea Tensions Sap Risk Appetite

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Miners are a bright spot in Monday's trade

Continue Reading Below

U.K. stocks sagged Monday, falling alongside European and Asian stocks as tensions between the U.S. and North Korea came back in focus.

The FTSE 100 shed 0.1% at 7,313.97, but pared the loss as consumer goods and tech shares joined the basic materials sector in moving higher. The index on Friday fell 0.9% (http://www.marketwatch.com/story/ftse-100-drops-as-travel-shares-rattled-after-terrorists-attacks-in-spain-2017-08-18), reducing its weekly advance to 0.2%.

European and most Asian stocks started the week in the red as a new cycle of escalation on the Korean Peninsula appeared set to rev up as U.S. and South Korea kicked off annual military exercises (http://www.marketwatch.com/story/tensions-expected-to-rise-as-us-south-korea-start-annual-war-games-2017-08-20). Pyongyang warned on Sunday that the upcoming exercises are "reckless behavior driving the situation into the uncontrollable phase of a nuclear war."

"North Korea tensions should remain elevated with the U.S. and South Korea holding joint military exercises from today to 31 August. North Korea condemns the joint exercises as a rehearsal for an invasion," said Sue Trinh, head of Asia FX strategy at RBC, in a note.

"We think volatility is more likely to pick up in and around the week beginning Sept. 4, coinciding with implementation of the latest sanctions and North Korea Foundation Day," she said.

Continue Reading Below

Tensions between the U.S. and North Korea recently led investors to flee so-called risk assets and pick up haven assets including gold , bonds and the Swiss franc .

Mining shares managed to push higher even as a risk-off mood hung over the equity markets. Iron ore heavyweights BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) and Rio Tinto PLC (RIO) (RIO) (RIO) were up by 1% and 0.9%, respectively. Earlier Monday, rival Australian iron ore producer Fortescue Metals Group Ltd. (FMG.AU) raised its dividend payout after annual profit more than doubled (http://www.marketwatch.com/story/fortescue-metals-profit-jumps-flags-dividend-rise-2017-08-21) on strong iron ore prices.

Metals prices were broadly higher, and shares of copper miner Antofagasta PLC (ANTO.LN) picked up 1.5% and Glencore PLC (GLEN.LN) moved up 0.5%.

Housing shares were able to advance Monday even as Rightmove said the average asking price for houses fell 0.9% in August. Persimmon PLC shares (PSN.LN) rose 1.5%, Barratt Developments (BDEV.LN) turned up 0.3% and Taylor Wimpey PLC (TW.LN) gained 0.9%.

The pound bought $1.2878, not far from $1.2876 late Friday in New York.

Centering on central banks: Already on the radar is the U.S. Federal Reserve's central bank symposium in Jackson Hole, Wyo., which starts Thursday and runs through Saturday.

Last week, ECB sources in a Reuters report dampened expectations for a hawkish shift from European Central Bank President Mario Draghi, saying Draghi will not deliver any new policy messages at the conference.

"This in itself suggests that the [ECB's] Governing Council remains to be convinced that it should announce its QE tapering plans at its next meeting on 7 September," said Investec's chief economist Phillip Shaw in a note late last week.

"But even without a landmark speech from Mr. Draghi, Fed Chair Janet Yellen is expected to address the symposium. And of course the event usually yields general clues to the direction of central bank thinking," said Shaw.

Read:Euro slides after ECB hints at no hawkish shift at Jackson Hole (http://www.marketwatch.com/story/euro-slides-after-ecb-hints-at-no-hawkish-shift-at-jackson-hole-2017-08-16)

(END) Dow Jones Newswires

August 21, 2017 06:17 ET (10:17 GMT)