Simmering Korea tensions hit global stocks and dollar

Global shares fell and the dollar dipped against the Japanese yen on Wednesday as still-simmering tension over the Korean peninsula kept investors wary of taking on risk. 

European and Asian shares dropped after the S&P 500 .SPX suffered its biggest one-day fall in three weeks on Tuesday as U.S. investors sold in reaction to North Korea's sixth and biggest nuclear weapons test on Sunday. 

These concerns helped push benchmark 10-year U.S. Treasury yields US10YT=TWEB to their lowest in almost 10 months and they stayed close to those levels on Wednesday. 

European markets had appeared largely to shrug off Pyongyang’s latest test by Tuesday, focusing instead on Thursday’s meeting of European Central Bank policymakers, which is expected to yield some clues as to when they will begin to scale-back monetary stimulus.

South Korean President Moon Jae-in told his Russian counterpart Vladimir Putin at an economic summit in Vladivostok that the situation on the Korean peninsula could become unpredictable if Pyongyang did not halt its provocative actions.

European shares opened lower. The pan-European STOXX 600 index fell 0.3 percent, with an index of banks .SX7P losing 0.5 percent. 

The dollar dipped 0.1 percent against a basket of currencies .DXY and was down 0.2 percent versus the yen JPY=, which investors often seek during uncertain times. 

Safe-haven government debt was against in demand. Ten-year Treasury yields US10YT=RR were flat at 2.07 percent, having fallen as far as 2.065 percent on Tuesday.

Indeed, the average yield on local currency emerging market sovereign debt dropped below 6 percent for the first time since February 2015. 

Fed Governor Lael Brainard said on Tuesday the central bank should be cautious about tightening policy further until it was clear inflation was heading towards target. 

German 10-year yields, the euro zone benchmark, hit their lowest in a week at 0.325 percent DE10YT=TWEB.