Trump Rhetoric Sinks Global Stocks

Investors pare back risk positions, taking profits as geopolitical tensions rise

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President Donald Trump speaks to reporters before a security briefing at Trump National Golf Club in Bedminster, N.J., Thursday, Aug. 10, 2017. Evan Vucci, AP
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Updated Aug. 11, 2017 4:36 a.m. ET

Global stocks fell again after further North Korea rhetoric Wall Street was poised for another lower opening Haven assets roseGlobal 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 towards 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

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