Trump Rhetoric Sinks Global Stocks -- 2nd Update
Global stocks plunged again Friday, pushing markets into some of their biggest weekly losses of the year following a continued escalation of threats between the U.S. and North Korea.
Benchmarks in Hong Kong and South Korea, which had been one of the best performers of the year, each slid 1.7% to put this week's drop at 3.2% and 2.2%, respectively.
"Market conditions were right for profit-taking" in stocks this week, said Alexander Ho Wan Lee, chief investment officer at Nimbus Capital Group.
The rising tensions, and the typical late-summer slowdown in trading, proved to be an opportunity for investors who have logged strong 2017 gains to pull back and await developments.
The concerns have gone so far as telling ING's Robert Carnell in a morning note to clients that "this situation is beginning to develop into this generation's Cuban missile crisis."
The Asian selling followed weakness on Thursday in Europe. That pressured U.S. equities-- which then sold off further in the last 90 minutes of trading after President Donald Trump said his Tuesday threat to unleash "fire and fury" on North Korea "maybe wasn't tough enough." U.S. indexes ultimately logged their biggest declines since May 17.
China raised the stakes with an editorial in the state-run Global Times late Thursday saying Beijing would intervene if there is a first strike against North Korea.
Korea's Kospi, which came into Friday on its first three-session losing streak since April--down 1.6% for that stretch--is poised to end the week at its lowest level since late May. Still, it started the day still up 16% for the year, which speaks to how strong Korean stocks, and many Asian markets, have been. Index giant Samsung Electronics is a major factor in the reversal, down 2.9% Friday and 6.5% for the week--its worst week since October.
Even hotter in 2017 has been Hong Kong. When trading ended Tuesday, the Hang Seng index had risen in 19 of the past 22 sessions and was up more than 25% for the year. But it fell Wednesday and Thursday--its first consecutive down days in a month--and ended morning trading Friday down 1.9%. If that holds, it will be the market's biggest one-day drop since November.
Chinese messaging and social-gaming company Tencent, whose surge of about 70% this year was key to the Hang Seng's gains, is off 4% Friday.
Given the lack of sustained stock selling this year in much of the world--let alone large declines--concern that a market correction is at hand isn't a surprise, analysts say. Many pullbacks have quickly reversed before they reached the 10% mark that commonly denotes a correction.
But the current geopolitical situation could keep potential buyers on the sidelines for now, said Mr. Lee--in fact, he added, it is already keeping some out of Asian markets, despite robust recent quarterly results from companies in the region.
In China, selling deepened as Friday morning progressed. Beijing warned of irrational trading in metals after steel-rebar and aluminum futures in China hit five-year highs this week.
And when Japanese traders get back to their desks on Monday, stocks will need to catch up with not just Friday's regional weakness but fresh yen gains. The currency strengthened steadily during Thursday's European trading and gained further in Asia. The dollar fell below Yen109 for the first time since June.
Early signs are the selling isn't set to worsen at the start of U.S. trading.
Write to Kenan Machado at kenan.machado@wsj.com
-- Global stocks fell again after further North Korea rhetoric
-- Wall Street was poised for another lower opening
-- Haven assets rose
Global stocks plunged again Friday following a continued escalation of threats between the U.S. and North Korea.
The Stoxx Europe 600 opened down 0.6%, while futures pointed toward a lower open on Wall Street.
The Dow Jones Industrial Average closed down 205 points Thursday, its biggest decline since May 17, after President Donald Trump rejected criticism that his threats to release "fire and fury" had been too inflammatory and said his statement "maybe wasn't tough enough."
China raised the stakes with an editorial in the state-run Global Times late Thursday saying Beijing would intervene if there is a first strike against North Korea.
Haven appetite continues to support assets like gold, which rose 0.1% to $1,291.50 a troy ounce.
"This situation is beginning to develop into this generation's Cuban missile crisis," said ING's Robert Carnell in a morning note to clients.
The CBOE Volatility Index, a measure of investors' expectations for swings in the S&P 500 over the next 30 days, surged 44% to 16.04 Thursday--its highest level since Election Day.
The rising tensions, and the typical late-summer slowdown in trading, proved to be an opportunity for investors who have logged strong 2017 gains to pull back and await developments.
"Given the great run we've had, seems like some sort of pullback wouldn't be surprising," said Michael Baele, managing director of investments at U.S. Bank Private Wealth Management.
In Asia, benchmarks in Hong Kong and South Korea, which had been one of the best performers of the year, slid 2% and 1.7% Friday to put this week's drop at 2.3% and 3.2%, respectively.
Samsung Electronics fell 2.8% Friday, and was down 6.1% on the week. Chinese messaging and social-gaming company Tencent Holdings, whose surge of about 70% this year was key to the Hang Seng's gains, fell 4.3% Friday.
Despite the drop, the markets have shown resilience with Korea's Kospi still up 14.5% year-to-date. The Hang Seng rose 22.3% in the same period.
In China, selling deepened as Friday progressed. Beijing warned of irrational trading in metals after steel-rebar and aluminum futures in China hit five-year highs this week.
When Japanese traders get back to their desks on Monday, stocks will need to catch up with Friday's regional weakness and the yen's recent gains against the dollar. The WSJ dollar index, which measures the dollar against a basket of currencies, was up 0.1%.
Write to Kenan Machado at kenan.machado@wsj.com
(END) Dow Jones Newswires
August 11, 2017 04:20 ET (08:20 GMT)