Daily Times

LONDON: World stocks and the euro fell for a fourth day on Tuesday, as investors who had piled into both all year took a step back as the list of global uncertainties began to lengthen again.

They included a new low in US and North Korean relations, a jolt to the right in German politics, rising oil prices and falling tech stocks and the prospect of more guidance later from the Federal Reserve on its next moves.

Futures markets pointed to a flat start for Wall Street with the mood still nervy after Facebook suffered its biggest drop in 10 months on Monday and the cumulative decline in Apple’s stock price neared 10 percent.

European bourses struggled too despite solid French data and a new one-month low for the euro which has been helping the bloc’s stocks in recent days.

The single currency fell back under $1.18, still feeling the effects of Sunday’s bruising German election win for Angela Merkel that had given it its worst day of the year.

The yen, which traditionally performs strongly in jittery markets, meanwhile faded, having gone as high as 111.550 to the dollar, and gold also dropped back from a one-week high.

That came after North Korea’s foreign minister said a tweet by US President Donald Trump that its leader Kim Jong Un might not be around for too much longer, amounted to a declaration of war.

“I think we have a classic case of risk-on (to) risk-off across markets,” said Saxo Bank’s head of FX strategy, John Hardy.

“There is a lot being attributed to North Korea but I think there are a lot of other factors here,” he added, citing the drop in US tech stocks and the weekend German elections that saw a far-right party enter parliament.

Support for Chancellor Merkel’s conservatives, which won the election, unexpectedly slumped to its lowest level since 1949.

The euro slipped as far as $1.1782 in early afternoon trade in London, its weakest since Aug. 25, after falling around 0.9 percent on Monday – its heaviest one-day loss since December.

French President Emmanuel Macron, who wants to overhaul the European Union’s single currency zone and whose ideas include creating a euro zone budget and finance minister, will lay out his plans in Paris later on Tuesday.

Yet again though, the bond market’s reaction to the latest escalation in tension between North Korea and the US proved short-lived.

Yields on US Treasuries and German Bunds fell to a day’s low follow North Korean Foreign Minister’s Ri Yong Ho comments on Trump’s tweet. Both traded back up on Tuesday in what analysts say reflects a widespread belief that diplomacy will prevail. Most other euro zone bond yields were also a touch higher.

A speech from Fed chair Janet Yellen, due at 1645 GMT and titled “prospects for growth: reassessing the fundamentals”, was also coming into focus.

The dollar was climbing and investors will be parsing her words, and those of other Fed officials, for clues on whether the US central bank will stick to plans to raise interest rates again in December.

Yellen’s speech comes a day after Fed officials provided differing views on inflation, with one saying inflation weakness was fading, while another suggested he was nervous it wouldn’t.

Published in Daily Times, September 27^th 2017.