There’s been a distinct souring of risk appetite since the European close last night with rising tensions between the US and North Korea causing investors to sell equities and move into traditional safe-haven assets such as Gold and the Japanese Yen. The FTSE 100 is lower by more than 60 points on the day whilst the pound is rising against all its major peers barring the Swiss Franc and Japanese Yen - two currencies that traditionally perform well in risk-off environments.
North Korea considering attack on US territory
The moves come on news that Guam, a US Pacific territory, is under threat of an attack from North Korea according to reports in the state media. The North’s official news agency has said it was considering the attack which would take aim at a base for US bombers after US president Trump upped the ante on Tuesday evening by stating that any more threats from Pyongyang would be met with “fire” and “fury.” The swift response from North Korea suggests they are not keen on backing down and should they attack Guam with medium to long range rockets it seems inevitable that this will turn into a full blown war. Global leaders have long since worried about North Korea and its plans to develop nuclear warheads but there has been a clear ramping up of tensions since Trump took office and the last 24 hours have seen these rise to previously unprecedented levels.
Markets on edge
The latest developments represent a significant ramping up of these long-running tensions and stock markets are trading in a skittish mood this morning as the threat of a full blown war becomes very real. There’s a slew of red across European markets since the open with shares being sold at a fair clip and the breadth of the decline seen in the leading benchmark in London is a worrying sign. Overall there are less than a dozen of the FTSE 100 firms higher on the day, with the majority of sectors suffering from the US-N.Korea story. Fresnillo (LON:FRES) and Randgold Resources (LON:RRS) are the two best performers as the price of Gold has caught a bid following the increased demand for the safe-haven asset. Gold futures are now not far from their highest levels in almost 2 months and within 3% of their year-to-date peak.