Political tensions continue to weigh on stocks

Political tensions continue to weigh on stocks”

Tensions with North Korea appear to have finally shaken the confidence of U.S. investors, after the S&P 500 opened 0.8% lower, threatening to end its 15-day streak with a closing streak of more than 0.3%, a 90-year record.

A weaker opening on Wall Street further added to the downward pressure in Europe.

The VIX, the Chicago Board Options Exchange Volatility Index, which measures market expectations for swings in stock prices and traders use as a fear gauge, closed the day on Thursday at 16.04, its highest close since the day of the United States presidential election in November.

"We're through most of the earnings season and the valuations [in the stock market] become a bit problematic when you have something like North Korea come up", said Maris Ogg, president at Tower Bridge Advisors, as quoted by CNBC. "The level of risk aversion we're seeing suggests traders still believe the prospect of military action is very small but precautions are still being taken nonetheless, as this still has the potential to escalate very quickly and unexpectedly".

For the week, the London index is looking at a 2.4% drop, which would be its biggest weekly loss since April.

The euro-region blue-ship STOXX 50 index fell 0.9% and the DAX in Frankfurt lost 0.6%. The price of gold was up 0.3% at $1,293.60 on Friday morning in London.

"We assume markets will move on if it remains purely a war of words but the sell-off looks durable". The European single currency traded as low as 1.1719 overnight, a level it hasn't seen since July 28, before paring loses to around 1.1740 by the start of trading on the Continent.

Angry exchanges over Pyongyang's nuclear and missile programmes are stoking fears of a miscalculation that could lead to catastrophic consequences on the Korean peninsula and beyond.

Sentiment is expected to remain downbeat in today's trading, amid the ongoing summer lull and after the Dow posted its worst drop since May after President Donald Trump doubled down on his remarks from earlier this week that North Korea would face "fire and fury".

The reclusive state raised the stakes further with a detailed plan to send a salvo of missiles towards the USA territory of Guam.

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