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Global stock markets rattle after North Korea missile test

Global stock markets rattled and the dollar fell sharply Tuesday, as investors around the world were rattled by North Korea’s missile launch.

U.S. stocks were set to open sharply lower as the missile test over Japan escalated tensions with the West, and President Donald Trump warned that ‘all options are on the table’ in terms of how to respond to Pyonyang.

The launch too place on Tuesday morning, with a mid-range ballistic missile being launched from North Korea and sent over the island of Hokkaido before going down in the Pacific Ocean.

Sharp drop: A dealer puts his hands on his head as the benchmark Korea Composite Stock Price Index (KOSPI) dived on the news of North Korea’s missile test earlier in the day

It agitated leaders around the world, with South Korea being quick to take action with a military drill near its border to the North.

President Trump called North Korea’a grave and growing direct threat to the United States, Japan and the Republic of Korea, as well as to countries around the world,’ and UK Prime Minister Theresa May blasted the test as ‘outrageous’ and ‘illegal’.

The ballistic missile launch also had an effect on the global financial markets.

In the U.S. Dow e-minis were down 108 points, while the Nasdaq 100 e-minis were down 46 points.  The dollar hit its lowest level since mid-April against the yen and was last down 0.7 percent at 108.55. 

In the UK, the FTSE 100 index of leading British shares was 1.2 percent lower, and the pan-European STOXX index fell as much as 1.7 per cent to their lowest in six months before paring losses to trade down 1.3 percent.  

Market bombs: Traders work in front of the German share price index, DAX board, at the stock exchange in Frankfurt,  as global markets reacted to North Korea's missile test

Market bombs: Traders work in front of the German share price index, DAX board, at the stock exchange in Frankfurt, as global markets reacted to North Korea’s missile test

Japan’s Nikkei hit a four-month low before paring losses to end 0.5 percent down and South Korea’s Kospi KS11 shed as much as 1.6 percent before ending down 0.2 percent.

While stocks were suffering, traditional safe haven assets were in demand, including gold, which was up 0.8 percent at $1,325.30 an ounce. The Swiss franc was also in the ascendant, with the dollar down 1.2 percent at 0.9442 SFr 

The euro, which breached $1.20 for the first time since January 2015, was one of the major beneficiaries of the risk-averse mood across financial markets.

‘The North Korean escalation has triggered a significant risk-off move,’ Alessandro Balsotti, head of asset management at JCI Capital Limited, said in his daily note to clients.

‘However … observers believe it won’t be enough to trigger a material reaction from the United States-South Korea axis. It wouldn’t be surprising, then, if investors take advantage of this geopolitical fear to buy the dips.’

The MSCI World Index, which tracks stocks from developed economies, fell just 0.1 and remained above a five-week low hit earlier his month on jitters over North Korea, growing turmoil at the White House and a deadly attack in Spain.