Global Markets Slip on North Korea Threats

By Marina Force and Kenan Machado Features Dow Jones Newswires

Global stock markets were broadly lower Tuesday, following fresh threats from North Korea and weakness in technology and health care shares.

Continue Reading Below

The Stoxx Europe 600 was down 0.1% in early morning trade, led by losses in the tech sector. Asia stocks were also lower amid a pullback in shares of tech firms.

North Korea tensions escalated Monday, after the foreign minister warned that his country would shoot down U.S. warplanes even if they were outside the nation's airspace. In the U.S., the White House dismissed assertions about war and the Pentagon brushed off the military threat.

The war of words between North Korea and the U.S. has pressured major indexes and sent haven assets like gold higher a few times since summer.

"Markets do get jolted by these things," said Sat Duhra, a portfolio manager at Janus Henderson Investors, referring to the escalating military tensions. "The impact is on equity risk premium and on sentiment really," he said.

Investor sentiment was already bearish, given the Federal Reserve's plans to shrink its balance sheet which should lead to tighter liquidity, analysts said.

Continue Reading Below

Haven assets had a muted reaction to the latest comments from North Korea. Gold prices and the Japanese yen, which tends to rise when markets stutter, were flat, while the Swiss franc lost 0.3%.

Central bank speeches will share center stage with geopolitical tensions this week, with Federal Reserve Chairwoman Janet Yellen scheduled to talk in Cleveland later Tuesday and Fed Vice Chairman Stanley Fischer speaking Thursday.

Investors are hoping for monetary guidance from the Fed, which last week hinted it would raise rates once more this year. However, many traders were skeptical the Fed would provide any clarity.

"I don't think there is going to be an a-ha moment for the markets after any of the speeches. They [Fed members] tend to move back and forth between hawkish and dovish, in terms of their language at least," said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management.

Federal-funds futures, used by investors to place bets on the Fed's rate-policy outlook, showed Monday a 72.8% chance of a rate increase by December, according to CME Group data.

In the bond market, the 10-year German government bond yield rose to 0.404%, from 0.395% Monday. The 10-year Treasury yield also moved higher to trade at 2.222%, compared with Monday's close of 2.220%. Yields rise when prices fall.

Meanwhile, Brent crude was down 0.6% to trade at $58.09 a barrel, after hitting its highest level in more than two years Monday, amid a growing market consensus that the OPEC-led deal with major producers limiting output will be extended.

In Asia, South Korea's Kospi was down 0.3%, with Samsung Electronics off 3.5 %. Hong Kong's Hang Seng Index fell 0.1%, dragged down by the underperformance of the heavyweight Tencent Holdings, which fell as much as 3.8% earlier, but pared some if its losses to trade down 1.5%.

Elsewhere, Japan's Nikkei Stock Average moved 0.3% lower, with tech stocks also facing selling pressure. Sony Corp. and Nintendo Co. were down 2% and 1.9%, respectively.

Futures pointed to a 0.1% opening loss for both the S&P 500 and the Dow Jones Industrial Average, after Wall Street closed lower on Monday with technology stocks under pressure.

Write to Marina Force at marina.force@dowjones.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

September 26, 2017 03:55 ET (07:55 GMT)