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Tech Selloff, North Korea Threats Keep a Lid on Stocks

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09/26/2017 | 02:53pm CEST
By Marina Force 

Global stock markets were mixed Tuesday, following a selloff in technology shares on Wall Street and fresh threats from North Korea.

The Stoxx Europe 600 was flat, after opening in the red, with European mining and energy shares among the biggest winners. Asia stocks closed broadly lower amid a pullback in shares of tech firms.

Futures pointed to a flat opening for both the S&P 500 and the Dow Jones Industrial Average, after Wall Street closed lower on Monday with tech stocks under pressure.

North Korea tensions escalated Monday, after the foreign minister warned that his country would shoot down U.S. warplanes even if they were outside the nation's airspace. In the U.S., the White House dismissed assertions about war and the Pentagon brushed off the military threat.

The war of words between North Korea and the U.S. has pressured major indexes and sent haven assets like gold higher a few times in recent months.

"Markets do get jolted by these things," said Sat Duhra, a portfolio manager at Janus Henderson Investors, referring to the escalating military tensions.

Haven assets' reactions to the latest comments from North Korea were muted. Gold prices were down 0.5% and the Japanese yen, which tends to rise when markets stutter, was off 0.2%, while the Swiss franc lost 0.5%.

Elsewhere in the currency market, the WSJ Dollar Index, which measures the greenback against a basket of 16 others, rose 0.4% to 86.14 Tuesday, after closing Monday at its highest this month. The euro fell 0.5% against the dollar, extending Monday's losses, after Angela Merkel's conservative alliance won the German election, but lost ground to the nationalist Alternative for Germany group.

"Politics is really difficult to predict, particularly coalitions, horse-traded behind closed doors...I think the coalition [government] will take some time to form and so we will have some political uncertainty there," said Anthony Rayner, fund manager of the CF Miton Multi Asset Fund, signaling this might weigh on the currency.

Central bank speeches will share center stage with geopolitical tensions this week, with Federal Reserve Chairwoman Janet Yellen scheduled to talk in Cleveland later Tuesday and Fed Vice Chairman Stanley Fischer speaking Thursday. Markets will also be watching U.S. GDP and personal spending data due Thursday for cues on the central bank's policy path.

Investors are hoping for monetary guidance from the Fed, which last week hinted it would raise rates once more this year. However, many traders were skeptical the Fed would provide any clarity.

"I don't think there is going to be an a-ha moment for the markets after any of the speeches. They [Fed members] tend to move back and forth between hawkish and dovish, in terms of their language at least," said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management.

Federal-funds futures, used by investors to place bets on the Fed's rate-policy outlook, showed Monday a 73% chance of a rate increase by December, according to CME Group data.

In the bond market, the 10-year Treasury yield moved slightly higher to trade at 2.221%, compared with Monday's close of 2.220%. Yields and prices move in opposite directions.

Meanwhile, Brent crude fell 1.3% to trade at $57.68 a barrel, after hitting its highest level in more than two years Monday, amid a growing market consensus that the OPEC-led deal with major producers limiting output will be extended.

In Asia, South Korea's Kospi closed down 0.3%, with Samsung Electronics off 3.7%. Japan's Nikkei Stock Average moved 0.3% lower, with tech stocks also facing selling pressure. Sony and Nintendo were down 2% and 1.9%, respectively. Hong Kong's Hang Seng Index finished unchanged, and the Shanghai Composite Index added 0.1%.

Kenan Machado contributed to this article.

Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP -0.58% 2781.14 End-of-day quote.-16.08%
DJ INDUSTRIAL 0.16% 26534.36 Delayed Quote.7.17%
HANG SENG 1.18% 27816.31 Real-time Quote.-8.16%
KOSPI COMPOSITE INDEX 0.32% 2333.19 Real-time Quote.-5.20%
NASDAQ 100 0.25% 7582.8991 Delayed Quote.18.02%
NASDAQ COMP. 0.14% 8019.7047 Delayed Quote.15.70%
NIKKEI 225 0.39% 24033.79 Real-time Quote.4.85%
S&P 500 -0.13% 2915.56 Real-time Quote.9.19%
US DOLLAR INDEX -0.06% 94.13 End-of-day quote.2.48%
WTI -0.24% 71.77 Delayed Quote.19.17%
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