U.S. Stocks Drop, Volatility Jumps on Trump Threat: Markets Wrap

  • Modest moves in Asia are replicated in Europe; oil pares gain
  • Investors seek next catalyst; U.S. inflation is due Friday

UBS's Schnider Expects Gold Prices to Move Sideways

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U.S. stocks fell and a measure of equity volatility spiked higher after President Donald Trump delivered a warning to North Korea amid rising tensions between the nations. Treasuries slipped, while the yen strengthened.

The S&P 500 Index fell to session lows and the CBOE Volatility Index jumped 11 percent shortly before 3:30 p.m. in New York when Trump said further threats from the country would be met with “fire and fury.” The comments jolted markets from a summer slumber, with U.S. assets largely little changed for most of the session. The 10-year Treasury yield rose. Crude retreated toward $49 a barrel.

Trump’s comments followed a report in the Washington Post, citing a Defense Intelligence Agency analysis, that Pyongyang successfully developed a miniaturized nuclear warhead that could fit onto its missiles. He said North Korea will be “met with fire and fury and, frankly, power the likes of which the world has never seen before” if Kim Jong Un’s regime continues to threaten the U.S.

Markets had been listless with few catalysts to give investors reason for conviction. South Africa’s rand fell after President Jacob Zuma survived a no-confidence motion in parliament. The focal point of this week looks set to be Friday’s U.S. inflation data, which may be key to the interest-rate outlook of the world’s biggest economy.

Terminal users can read more in our Markets Live blog.

Also among the key events looming this week:

  • U.K. factory output for June is due Thursday, with industrial production for Italy on Wednesday and for France on Friday.
  • This week’s Fed speakers aren’t done: keep a keen ear out for comments by New York Fed boss Bill Dudley on Thursday.
  • Dutch Prime Minister Mark Rutte resumes talks to form a coalition government on Wednesday.
  • Argentina, Mexico, New Zealand, Peru, the Philippines, Serbia and Zambia set monetary policy.

And here are the main moves in markets:

Stocks

  • The S&P 500 Index fell 0.2 percent to 2,474.97 at 4 p.m. in New York.
  • The Dow Jones Industrial Average fell 32.48 points, while the Nasdaq Composite Index lost 0.2 percent.
  • The Stoxx Europe 600 Index erased losses to end higher by 0.2 percent.
  • The MSCI All-Country World Index fell 0.1 percent.

Currencies

  • The euro fell 0.4 percent to $1.1749.
  • The Bloomberg Dollar Spot Index rose less than 0.1 percent.
  • The British pound decreased 0.4 percent to $1.299, the weakest in more than two weeks on a closing basis.
  • South Africa’s rand tumbled 1.2 percent to 13.395 per dollar.

Bonds

  • The yield on 10-year Treasuries rose two basis points to 2.27 percent.
  • Germany’s 10-year yield gained two basis points to 0.47 percent.
  • Britain’s 10-year yield increased two basis points to 1.157 percent.

Commodities

  • Gold futures climbed 0.1 percent to $1,266.20 an ounce.
  • West Texas Intermediate crude futures fell 0.5 percent to settle at $49.17 a barrel amid speculation that stockpiles may rise once the summer period of higher demand ends.

— With assistance by Samuel Potter, and Sid Verma

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