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Stocks Drop, Yen Gains as Geopolitical Angst Grows: Markets Wrap

Jeff Sutherland
Updated

(Bloomberg) -- Stocks from Tokyo to Moscow dropped, while the yen gained, amid an uptick in political tension after a U.S. bombing in Afghanistan and comments from a North Korean official. Trading was thin with many markets around the world closed Friday for holidays.

Japan’s Topix index capped its longest string of weekly losses in 15 months after the U.S. dropped the largest non-nuclear bomb it’s ever used in combat on Islamic State positions in Afghanistan. The yen erased declines and equity markets open in Asia extended losses as a North Korean official said the country “will go to war” if America chooses to provoke it.

The action in Afghanistan came a week after U.S. President Donald Trump authorized missile strikes against Syria for a chemical weapons attack on civilians. It also coincides with rising concern that North Korea may conduct another nuclear test or missile launch. Trump has vowed that the U.S. will act to stop North Korea’s nuclear program unless China manages to constrain its neighbor.

North Korea said Trump is “making trouble” with “aggressive” tweets, according to the Associated Press, citing an interview with North Korea’s vice foreign minister Han Song Ryol. North Korea won’t “keep our arms crossed” in the event of a U.S. pre-emptive strike, the AP quoted the official as saying.

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Traders are also trying to get a handle on Trump’s fiscal and economic plans following his remarks from Wednesday, in which he called the dollar too strong, signaled a softening in his stance on China’s currency practices and left open the possibility of reappointing Federal Reserve Chair Janet Yellen.

Here’s what investors are watching:

  • Asian markets including China, Japan, and South Korea were open Friday. Most European markets are closed, as are those in the U.S.

  • Traders will be keeping tabs on the Korean peninsula over the weekend. The “Day of the Sun” holiday on April 15 commemorates the birth of Kim Il Sung, North Korea’s long dead founder and current leader Kim Jong Un’s grandfather. The event raises the chance of provocative action from the nuclear-armed state.

  • Data on China’s first-quarter gross domestic product is due Monday. The world’s second-largest economy probably expanded 6.8 percent from a year earlier, a Bloomberg survey of economists showed, the same pace as the prior three months.

Here are the main moves in markets:

Stocks

  • The Topix fell 0.6 percent to the lowest closing level since Nov. 22. The index dropped for a fifth straight week, the longest losing streak since December 2015.

  • South Korea’s Kospi index dropped 0.6 percent, after rallying 0.9 percent on Thursday. The gauge lost 0.8 percent for the week. The Shanghai Composite Index slipped 0.9 percent, also capping a weekly decline. Taiwan’s Taiex retreated 1.1 percent.

  • Russia’s Micex slumped 0.6 percent as of 8:53 a.m. London time, bringing its loss for the week to more than 4 percent, the worst showing since mid-January. Shares in Turkey slipped 0.1 percent.

  • The S&P 500 Index lost 0.7 percent on Thursday, falling for a third straight day. The Stoxx Europe 600 Index lost 0.4 percent.

Currencies

  • The yen rose 0.1 percent to 108.94 per dollar, reversing an earlier decline. The currency is up 1.9 percent for the week, its biggest weekly gain in a month.

  • South Korea’s won dropped 0.9 percent, after rebounding in the previous two sessions.

  • The ruble fell for the first time this week, while the euro was up less than 0.1 percent to $1.0620. The Turkish lira fell for a second day, slumping 0.4 percent.

Bonds

  • The yield on 10-year Treasuries was essentially flat at 2.24 percent on Thursday, following three days of declines.

Commodities

  • Gold fell 0.1 percent to $1,286.25 an ounce in Friday trading. It has advanced 2.5 percent for the week, trading near the highest level since November.

  • West Texas Intermediate crude rose 0.1 percent to $53.18 a barrel on Thursday, giving it a weekly gain of 1.8 percent.

--With assistance from Eric J. Weiner

To contact the reporter on this story: Jeff Sutherland in Tokyo at jsutherlan13@bloomberg.net.

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Emma O'Brien

©2017 Bloomberg L.P.