Asian markets fell broadly on Tuesday as investors reacted to news that North Korea had fired a ballistic missile over the northern Japanese island of Hokkaido. It was the first time since 2009 that North Korea has sent a missile through Japanese airspace, and investors flocked to safe haven assets such as gold, the Yen and U.S. Treasuries in response, while dumping equities. Markets did calm throughout the day, finishing off their session lows, but still posting broad based losses.
European markets fell to a six month low as the missile launch by North Korea put investors into risk-off mode, and the Euro surged above the 1.2000 level versus the U.S. dollar. That stronger Euro was especially negative for the export heavy DAX index in German. One of the few bright spots across Europe were gold mining shares, which made solid gains in response to gold reaching 11-month highs. In economic news French consumer spending in July was much stronger than expected, rebounding strongly from a June contraction. London investors returned from a long three day holiday extended weekend to send the FTSE100 sharply lower as well, where shares of insurers led losses. U.K. property companies were also weak after data showed U.K. home prices fell 0.1% in August.
U.S. markets shook off early weakness and ended the day higher as investors were able to look beyond the mounting tensions between North Korea and the U.S. The Dow recovered from a loss of more than 200 points in its biggest intra-day swing since December 2016, with the rebound powered by gains from Boeing (NYSE:BA) and United Technologies (NYSE:UTX). Investor confidence was restored somewhat as the U.S. President delivered a more measured response to the North Korean aggression. Shares of oil refiners and insurance companies were the weakest sectors of the session. In economic news, U.S. consumer confidence gained in August, remaining just below a 16-year high.
FOREX
EUR/USD – The pair soared higher in early trade on safe-haven demand, hitting 1.2070, the highest level since January 2015. The gains didn’t remain however, and the pair, dropping right back near its starting level below the key psychological 1.2000 level.
USD/CAD – The pair began the day headed lower, but found support for a second consecutive session as it reached the 1.2440 level. The returning strength of the USD likely had most of the impact on the pair, which actually closed the day slightly higher. Falling crude prices are also bullish for this pair, which often moves inversely to the price of crude.
Cryptocurrencies – Bitcoin began rallying around the lunch hour in London, surging above the $4,700 level for the first time ever. Rival Ether also rallied on the day, nearing its own all-time high. Bitcoin Cash was the weakest, losing 12% and nearing the $500 level as it continues giving back the massive gains made between August 17th-19th.
Commodities
Metals – Precious metals gained on Tuesday, with gold settling at its highest level in eleven months as the North Korean missile launch sparked a wave of safe haven buying. The metals were off their highest levels of the day at the close though, as traders saw little indication of increased aggression from the U.S. While gold gained and palladium hit another 16 year high, silver edged slightly lower by the close.
Oil – Crude prices were sharply lower, but losses were pared later in the session to end just modestly lower. Traders await Wednesday’s crude supply data, and further details regarding damage and the shut in status of many US Gulf Coast refineries.
Indices
S&P500 – The S&P500 edged higher on Tuesday, recovering from sharp early losses, and overcoming broad based losses on a sector basis. Seven of the eleven S&P sectors ended the day in the red, but strength from the technology, industrial, and consumer staples sectors was enough to give the S&P a slight gain for the day.
DAX – Germany’s benchmark index was the worst performing market across Europe on Tuesday as the export heavy index suffered from the surge of Euro versus the U.S. dollar. On Wednesday, Germany will release consumer confidence results, and analysts expect it to improve further and hit 16-year highs.
Stocks
Boeing – Shares of the aircraft manufacturer continue to outperform the broader market. Investors remain extremely confident over the company’s cost cutting measures and ability to deliver increased profits in the future. One caution is that in looking at a price chart of Boeing we can see that price has gone parabolic recently, and as we all know, what goes up must come down. Since knowing when the pullback will occur is impossible, the astute traders will follow the stock closely and look for signs of increasing weakness, like new highs made on decreasing volume, or an inability to take new high levels.