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U.S., Asian shares dip after North Korean missile launch

Published 15/09/2017, 08:05
© Reuters. FILE PHOTO - Monitors showing TV news on North Korea's threat, the Japanese yen's exchange rate against the U.S. dollar and Japan's Nikkei share average are seen at a foreign exchange trading company in Tokyo
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By Hideyuki Sano

TOKYO (Reuters) - U.S. and European stock futures and Asian shares dipped slightly on Friday after North Korea fired another missile over Japan on Friday, demonstrating Pyongyang's defiance against intensifying U.N. sanctions.

U.S. stock futures (ESc1) fell as much as 0.3 percent earlier but last stood down just 0.1 percent while MSCI's Asia-Pacific share index excluding Japan (MIAPJ0000PUS) shed 0.1 percent, though it was still up 0.7 percent on the week.

Japan's Nikkei (N225) erased earlier gains to end 0.5 percent higher.

European stock futures dipped slightly, with Euro Stoxx 50 futures (STXEc1) down 0.15 percent.

North Korea fired a missile that flew over Japan's northern island of Hokkaido far out into the Pacific Ocean, travelling about 3,700 km (2,300 miles), far enough to reach the U.S. Pacific territory of Guam.

The launch took place just days after the U.N. Security Council approved new sanctions against Pyongyang for its Sept. 3 nuclear test, but markets are growing accustomed to North Korea's sabre-rattling.

"There have been reports suggesting North Korea is preparing a missile launch, so this was by no means a surprise," said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

"Also, in the past, markets have stabilised within a few days after a North Korean missile launch. So in a way this seems like something markets have already experienced before, thus producing a limited reaction," he added.

Before North Korea's missile launch, U.S. bond yields had risen while Wall Street shares were mixed after U.S. consumer inflation data rekindled expectations that the Federal Reserve will raise interest rates in December.

The U.S. consumer price index rose 0.4 percent in August from July, faster than the 0.3 percent increase forecast by analysts in a Reuters poll.

The so-called core CPI, which excludes volatile energy and food prices, rose 0.2 percent. On a 12-month basis, it was 1.7 percent, above the 1.6 percent forecast by economists.

Following the data, U.S. Fed funds rate futures were pricing in a roughly 45 percent chance the Fed will raise rates by December, versus around 25 percent at the start of this week.

The 10-year U.S. Treasuries yield (US10YT=RR) rose to as high as 2.225 percent, but slipped back to 2.182 percent in Asia on Friday following North Korea's missile launch.

In currency markets, the dollar failed to capitalise on the CPI data as the rally it begun at the start of the week ran out of steam. The euro traded at $1.1910 , off Thursday's two-week low of $1.18365.

Instead it was the British pound that stole the limelight after the Bank of England warned it might raise interest rates for the first time in a decade in the "coming months" if the economy and price pressures keep growing.

The pound hit a one-year high of $1.3407 on Thursday and last stood at $1.3388 .

Sterling's overnight index swaps are pricing in about a 50 percent chance of a rate hike in November.

Oil prices were lower on Friday but largely held the gains that had prices flirting with multi-month highs on Thursday as the clean-up after hurricanes in the United States gathered pace and the outlook for demand took on a firmer tone.

Brent crude futures (LCOc1) traded at $55.14 per barrel, down 0.6 percent on the day but up 2.5 percent on the week. They hit a five-month high of $55.99 on Thursday.

Elsewhere, bitcoin slipped another 3 percent after having tumbled 16 percent on Thursday when Chinese news outlet Yicai reported that China plans to shut down all bitcoin exchanges by the end of September.

© Reuters. FILE PHOTO - Monitors showing TV news on North Korea's threat, the Japanese yen's exchange rate against the U.S. dollar and Japan's Nikkei share average are seen at a foreign exchange trading company in Tokyo

BTCChina, one of China's top three exchanges, said on Thursday that it would stop all trading from Sept. 30.

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