September 22, 2017 / 8:13 AM / a year ago

Daily Briefing: Korean war of words triggers risk flight

LONDON (Reuters) - The escalating war of words over North Korea –- as U.S. President Donald Trump imposed tighter sanctions and Pyongyang said it might test a hydrogen bomb over the Pacific –- hit most Asian stock markets.

North Korea's leader Kim Jong Un makes a statement regarding U.S. President Donald Trump's speech at the U.N. general assembly, in this undated photo released by North Korea's Korean Central News Agency (KCNA) in Pyongyang September 22, 2017

Investors fled risky assets and in favour of gold, the yen and the Swiss franc.

The dollar was down 0.3 percent against a basket of major currencies but still up for the week. The yen was up 0.4 percent versus the dollar but heading for its worst week of the year, reflecting the different interest rate outlooks of the Federal Reserve, which signalled this week it would raise rates again this year, and the Bank of Japan, which kept rates on hold.

MSCI’s main Asia-Pacific share index, excluding Japan, was down 0.6 percent, Tokyo’s Nikkei closed 0.3 percent lower while South Korean and Australian shares were both down 0.8 percent.

In Europe, some analysts expect German equities, which have outperformed euro zone peers over the past four years, to get a further boost if German Chancellor Angela Merkel is confirmed as winner in Sunday's election, regardless of the government coalition she will set up.

Airlines are in focus after Air Berlin creditors picked German flagship carrier Lufthansa and the Britain's easyJet as possible buyers for the insolvent carrier's aviation business.

Also in the spotlight is Telia after news overnight from the U.S. that the Swedish phone company is to pay a nearly $1 billion fine to settle charges it paid bribes to win business in Uzbekistan.  

Other potential stock moving headlines: Roche receives EU approval for Gazyvaro, European approval for Actemra; Adecco targets faster growth as global economy recovers; Julius Baer hires UBS's Bartholet as chief risk office; Siemens to pick Alstom or Bombardier for rail talks within days - source; British engineer Smiths profit rises on strength in security scanners unit; Daimler joins rush to add more North American auto plants; Billionaire L'Oreal heiress Bettencourt dies aged 94.

Elsewhere in FX, the euro was up 0.2 percent at $1.1963 and sterling was slightly down on the day at $1.3566. Investors will be watching a speech by British Prime Minister Theresa May in which she will be hoping to persuade European Union negotiators to push ahead with Brexit talks.

Base metals prices dropped as investors shed risk assets. Copper is down 1.4 percent at $6,388 a tonne. Safe-haven gold, however, is up 0.5 percent at $1,298 an ounce.

Oil markets will focus on an OPEC meeting in Vienna at which the group will discuss whether to extend its output curbs. Brent was last up 13 cents a barrel at $56.56.

With Asian bourses well in the red, the MSCI emerging markets index slipped 0.6 percent on the day, wiping out any gains chalked up earlier in the week. South Korea’s won weakens 0.3 percent against the weaker dollar, while other currencies treading water.

Yet with markets adjusting to new rate views in the wake of Wednesday’s Fed meeting, major emerging currencies are without fail on track for weekly losses, most of them for the second straight week. Turkey’s lira, Mexico’s peso and India’s rupee are all on track to weaken more than 1 percent over the week, the latter crashing through the 65 level to record its worst week in more than 1-1/2 years.

Compiled by Nigel Stephenson Editing by Jeremy Gaunt

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