The Single Greatest Threat To Financial Markets
Wed Aug 30 2017
Eric Whitman (223 articles)

The Single Greatest Threat To Financial Markets

North Korea has once again ratcheted up geopolitical tensions with its most recent missile test, and the effects are being felt instock markets worldwide.

It’s just the latest example of just how sensitive the low volatility environment in global markets can be to sudden, unexpected political developments. While stocks have stopped reacting as much to headlines around US President Donald Trump, this latest development in North Korea provides a reminder of the ever-present risk of geopolitical strife.

“An even greater crisis may be looming in Korea,” Greg Valliere, chief global strategist at Horizon Investments, said in a client note on Tuesdays morning. “Chances of strategic strikes on North Korean missile sites have increased significantly after a reckless missile launch last night that unnerved the Japanese. Trump’s generals have plans drawn up, yet they are urging him to delay any action — but sanctions and war games have their limits, and this issue is now the single greatest threat to financial markets.”

Here’s a round-up of the damage in stocks caused by North Korea’s decision to fire a missile over Japan:

US

The benchmark S&P 500 declined 0.1% to 2,442.73 as of 1:01 p.m. ET after falling as much as 0.7% earlier in the day
The more tech-heavy Nasdaq 100 climbed 0.3% after declining more than 0.9% in the morning hours
The Dow nudged 0.1% higher after losing as much as 0.6% in the morning
The CBOE Volatility Index — or VIX — climbed 5.2% to 11.91 following a 27% spike earlier in the day. The stock market fear gauge hit a record low last month, but has spiked several times over the past couple weeks on North Korea news

S&P 2 dayA look at the S&P 500’s early-day decline on the North Korea news. The benchmark has now largely recovered losses.Business Insider / Joe Ciolli, data from Bloomberg

Asia

Japan’s Topix index declined as much as 0.7%, and eventually closed 0.2% lower
South Korea’s Kospi index plunged as much as 1.6%, before paring that loss and finishing only 0.2% in the red
The S&P/ASX 200 Index in Sydney decreased 0.7%
Hong Kong’s Hang Seng Index lost 0.4%
The Shanghai Composite Index fluctuated for much of its session before closing slightly higher

Europe

The Stoxx Europe 600 index slid as much as 1.7% to the lowest intraday level in almost seven months
The UK’s FTSE 100 index lost 0.8%, headed for the biggest drop in roughly three weeks
Germany’s DAX index fell 1.4% to its weakest level in more than five months

Eric Whitman

Eric Whitman

Eric Whitman is our Senior Correspondent who has been reporting on Stock Market for last 5+ years. He handles news for UK and Europe. He is based in London

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