Global Stocks Brush Off North Korea's Latest Missile Launch

By Hideyuki Sano Wall Street Dow Jones Newswires

North Korea threatens US and Japan

Heritage Foundation senior fellow Peter Brookes on North Korea's threats against Japan and the U.S.

European stocks ticked slightly lower Friday, after North Korea's latest missile launch over Japan raised geopolitical tensions but had a limited impact on major global markets. 

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The Stoxx Europe 600 was down 0.1% in midmorning trade, led by a 0.7% fall in the U.K's FTSE 100, which tends to fall when the British pound appreciates sharply. 

Futures pointed to a 0.1% opening loss for the S&P 500, after notching its third highest close in history, despite finishing down. 

In Asia, Japan's Nikkei 225 closed up 0.5% and South Korea's Kospi moved higher 0.4%, while Hong Kong's Hang Seng Index was up 0.1%. 

Earlier in the week, global stocks rallied as geopolitical tensions and fears over Hurricane Irma eased. North Korea's latest missile test early Friday revived some anxiety, but not enough to dent markets significantly. The launch is the second to fly over Japan in less than a month and the first since the United Nations adopted fresh sanctions Monday. 

"We had a good week in terms of macroeconomic data which reassure markets at some point, but today it is clearly back in geopolitical tension mode, even though the impact is rather limited," said Vincent Juvyns, global market strategist at J.P. Morgan Asset Management. 

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"In general, and the markets have kind of figured this out, geopolitical events are fairly short-lived. You have to be careful of them and they will create stress moments in the market, perhaps corrections, but they don't tend to last," said Matthew Peron, global head of equities for Northern Trust Asset Management. 

Haven assets had a similarly muted reaction to the latest Pyongyang test. Gold prices were up 0.1%, while the Japanese yen, which tends to rise when markets stutter, lost 0.5% against the U.S. dollar, while the Swiss franc gained 0.2%. 

Elsewhere in the currency market, the U.S. dollar was flat and the pound moved to as high as $1.3527 in midmorning European trading Friday, building on its 1.4% gain against the dollar after the Bank of England said Thursday it would keep interest rates unchanged, but signaled that officials are preparing to raise interest rates within months to restrain accelerating inflation. 

In the U.S., expectations grew among investors for a Federal Reserve rate increase this year, after inflation data came out better-than-expected. 

Investors see now a roughly 50% chance of a rate rise by the end of the year, up from 31% a week ago, according to Fed-fund futures tracked by CME Group. 

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Looking ahead, traders were awaiting more U.S. data for further cues on inflation. U.S. retail sales, the Michigan consumer sentiment index and industrial production are all due Friday. 

In the bond market, the 10-year Treasury yield moved lower to trade at 2.189% according to Tradeweb, compared with Thursday's close of 2.199%. The 10-year German government bond yield was also slightly off at 0.410%, from 0.416% Thursday. Yields fall as prices rise. 

In the commodities market, Brent crude lost 0.3% to trade at $55.34 a barrel and copper was up 0.2%, with the effects of recent tepid economic data out of China seeming to have run its course. 

Ese Erheriene contributed to this article. 

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