Daily Briefing: Markets calmer after North Korea jitters

Some calm returns to world markets after the high tension of last week surrounding North Korea’s military threat.

Even though there’s been little fresh development on that score over the weekend, Wall St stocks rallied to end in the black late Friday after three consecutive down days. 

That and some toning down of the belligerent rhetoric from Pyongyang and Washington has been enough to prompt some bounceback across Asia bourses early on Monday – with South Korea’s Kospi ending more than 0.6 percent higher and the won rising from one-month lows. 

Shanghai and HK shares were up smartly and the yuan fixed at its strongest in 11 months, even after Chinese industrial data for July came in well below forecast at annual growth rate of 6.4 percent. 

Although the retail sales readings for the same month were closer to expectations with a 10.4 percent increase, the overall picture combined with last week’s trade numbers indicate some cooling of the economy into the third quarter. 

While that may ease pressure on the authorities to tighten monetary policy further, the focus on Monday may now drift to trade as U.S. President Donald Trump is expected to order his trade adviser to determine whether to investigate trade practices that force U.S. firms operating in China to turn over intellectual property. 

By contrast to the Chinese economic numbers, Japanese second quarter growth estimates surged past forecasts – with the economy expanding 1 percent quarter-on-quarter, fuelled by rising consumption and capital expenditure. 

Partly due to what that sort of growth rate may mean for Bank of Japan policy settings and partly due to the North Korea tensions, the Nikkei underperformed sharply – losing one percent even though the yen fell back against a firmer dollar. 

Thin August trading and the geopolitical anxieties are likely to keep market moves erratic this week, with the ViX index of implied volatility on Wall St remaining well above 15 percent despite the S&P500 rise on Friday. 

European stock futures indicated gains across major benchmarks, with Germany’s DAX set for the strongest start to the week. Brent crude prices were a touch lower just below $52.