Global Stocks Shudder on Trump Warnings to North Korea
World stock markets and the dollar slid Wednesday after U.S. President Donald Trump warned of "fire and fury" in retaliation to North Korea's nuclear ambitions, sending traders fleeing to safe-haven investments.
North Korea raised the stakes just hours later, saying it was considering missile strikes near U.S. strategic military installations on the Pacific island of Guam.
Trump's comments marked a sharp intensification of Washington's rhetoric over the North's nuclear and missile programs, which saw a seventh set of United Nations sanctions imposed on it at the weekend.
"North Korea best not make any more threats to the United States," said Trump, speaking from his golf club in New Jersey on Tuesday. "They will be met with fire and fury like the world has never seen."
The comments dragged Wall Street down into negative territory in late Tuesday trading, snapping a nine-day streak of record closes by the Dow.
U.S. stocks fell further Wednesday with Trump taking to Twitter to say that the United States' nuclear arsenal was now "more powerful than ever before" in a fresh warning to North Korea.
"U.S. stocks are lower in early action, with sentiment getting uneasy as geopolitical tensions ramped up yesterday between the U.S. and North Korea, while some cooler-than-expected Chinese inflation reports are doing little to support conviction," said analysts at the Charles Schwab brokerage.
In Europe, equities dived with London losing 0.6 percent, while Frankfurt shed 1.1 percent and Paris fell 1.4 percent .
The news was also greeted with dismay by traders in Asia, with Tokyo down 1.3 percent, Hong Kong losing 0.4 percent and Seoul registering a 1.1-percent decline.
Investors shunned risky equities and flocked instead to traditional safe-havens like precious metal gold, the Japanese yen, and bonds.
In foreign exchange activity, the dollar hit a two-month low at 109.56 yen, while the euro struck a three-week trough against the Japanese unit.
- Stocks suffered -
"European stocks have suffered greatly today as traders were prompted to cut-and-run due to the escalating tensions between the U.S. and North Korea," said market analyst David Madden at CMC Markets UK.
"The stand-off between the two countries has encouraged dealers to dump stocks and seek safe haven investments like gold," he added.
"While the two nations are at loggerheads, it is going to be difficult to imagine money flowing into stocks."
Financial analyst Connor Campbell at Spreadex noted the Dow has managed to avoid the more dramatic drops in European indices and that it remains unclear whether the rally in the blue chip gauge is really over or not.
"For most of Trump's tenure the Dow has left the dollar to deal with the President's constant policy disappointments, so it will be interesting to see whether today's drop marks a change in direction for the record-breaking index, or if it is merely a knee-jerk blip exacerbated by an empty economic calendar," said Campbell.
- Key figures around 1530 GMT -
London - FTSE 100: DOWN 0.6 percent at 7,498.06 points (close)
Frankfurt - DAX 30: DOWN 1.1 percent at 12,154 (close)
Paris - CAC 40: DOWN 1.4 percent at 5,145.70 (close)
EURO STOXX 50: DOWN 1.4 percent at 3,467.43
New York - Dow: DOWN 0.3 percent at 22,013.16
Tokyo - Nikkei 225: DOWN 1.3 percent at 19,738.71 (close)
Hong Kong - Hang Seng: DOWN 0.4 percent at 27,757.09 (close)
Shanghai - Composite: DOWN 0.2 percent at 3,275.57 (close)
Euro/dollar: DOWN at $1.1743 from $1.1754 at 2100 GMT on Tuesday
Pound/dollar: UP at $1.3008 from $1.2994
Dollar/yen: DOWN at 109.89 yen from 110.35 yen
Oil - Brent North Sea: UP 10 cents at $52.24 per barrel
Oil - West Texas Intermediate: UP 2 cents at $49.19