LONDON MARKETS: FTSE 100 Falls After Pyongyang Again Tests Its Nuclear Capabilities

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Gold shares benefit in hunt for haven assets

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U.K. stocks lost ground Monday, falling alongside markets throughout Europe and Asia after North Korea conducted another test of its nuclear capabilities.

The FTSE 100 index moved down 0.3% to 7,419.65, with financial and industrial shares among declining sectors. But oil and gas and consumer-services shares rose modestly.

The top advancers on the index were Fresnillo PLC (FRES.LN) and Randgold Resources Ltd. (RRS.LN) , rising 2.2% and 1.9%, respectively, as gold prices leapt nearly 1% and traded near a 1-year high (http://www.marketwatch.com/story/gold-rises-near-1-year-high-after-north-korea-tests-nuclear-bomb-2017-09-04). Investors snapped up gold-related assets after North Korea on Sunday conducted its sixth and most powerful nuclear test (http://www.marketwatch.com/story/we-have-many-military-options-mattis-warns-north-korea-2017-09-03).

"Given the geopolitical circumstance it is hardly surprising that riskier assets such as equity indices are feeling the heat," said Fiona Cincotta, market analyst at City Index, in a note. "Meanwhile flows into safe havens once again increased in what is becoming a regular pattern on a Monday after another weekend of defiance from Pyongyang."

On Monday, media reports from South Korea said Pyonyang appeared to making preparations for the possible launch of another intercontinental ballistic missile (http://www.marketwatch.com/story/north-korea-is-getting-ready-for-another-possible-icbm-launch-says-south-korea-2017-09-04).

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Korea's Kospi finished lower by 1.2% and the Stoxx Europe 600 (http://www.marketwatch.com/story/european-stocks-drop-after-north-korea-tests-its-nuclear-arsenal-2017-09-04) fell 0.5%.

U.S. Defense Secretary James Mattis on Sunday warned North Korea that any attack on the U.S. or its allies would be met with a massive military response (http://www.marketwatch.com/story/we-have-many-military-options-mattis-warns-north-korea-2017-09-03). The U.N. Security Council will hold an emergency meeting on Monday.

Decliners on the FTSE 100 included Asia-focused bank Standard Chartered PLC (STAN.LN) as its shares fell 1.1%. Trading in the U.S. is closed for the Labor Day holiday, but stock futures were lower (http://www.marketwatch.com/story/us-stock-futures-drop-after-north-korea-test-as-traders-take-labor-day-break-2017-09-04).

"North Korea carried out the nuclear test on Sunday with full knowledge that it would enrage Beijing," said Cincotta, with the test's timing meaning it was threatening to overshadow a summit of the BRICS nations (Brazil, Russia, India, China and South Africa) hosted by China.

The pound bought $1.2948, not far off from late Friday at $1.2952. The dollar fell against major rivals, including the Japanese yen and the Swiss franc , considered haven plays.

Economic data: The pound was little changed after a reading of U.K. construction activity in August hit its lowest in a year. IHS Markit/CIPS said its construction PMI came in at 51.1 compared with a 51.8 FactSet estimate.

"The sector hit a roadblock this month as purchasing activity slowed for the third month and new business wins were hard to come by," said CIPS' director of customer relationships Duncan Brock in a statement. "Reduced government spending, economic uncertainty and Brexit-delayed decision-making among clients were largely to blame," he said.

(END) Dow Jones Newswires

September 04, 2017 07:36 ET (11:36 GMT)