Stock Market News (European Open) – US-North Korea tensions command equity market activity, induce spike in volatility

Ioannis Fotiadis, XM Investment Research Desk

Mounting tensions between the US and North Korea have weighed on equity markets, sending the majority of the Asian and European bourses into red territory and inducing a spike in volatility. Bar Australia’s equity benchmark, the S&P/ASX 200 that rose 0.38% today, all other major bourses in Asia finished day lower. Japan’s Nikkei 225 was down 1.29%, followed by the Hang Seng index that fell 0.36% and the Shanghai Composite index that dropped 0.03%.

North Korea announced that its leader Kim Jong Un was weighing a possibility to strike the US Pacific territory of Guam as a response to Donald Trump’s earlier comments that any threats made by North Korea will be met “with fire and fury like the world has never seen”.

European bourses were not spared following this escalating geopolitical turmoil. In addition, an incident in a Parisian suburb when a car hit a group of soldiers has pushed shares even further down, as the act is being treated as deliberate. The pan-European STOXX 600 index fell 0.75% in the early hours of trading as all sectors plunged, led by a 1.04% drop in financials. The blue chip STOXX 50 index fell 0.39%. The Swiss SMI fared the worst, plunging 1.52%, followed by a 1.25% drop in the French CAC.

Earnings also led to some heavy losses. The share price of G4S, the world’s largest security group, fell 5.38% amid its organic growth cooling down in emerging markets. Chemical company Brenntag was down 5.21% on disappointing quarterly results.

Scout24’s share price was leading the gainers among the STOXX 600 companies, jumping 7.06% after the German online classifieds company’s first-half results impressed. Novo Nordisk shares were the second-best performer, rising 5.00% on a strong quarter despite a negative forex impact.

Later in the session, Twenty-First Century Fox is due to report earnings with analysts expecting a rise in its top-line. Shares of Walt Disney could be of interest in the wake of its quarterly earnings release last night. The company reported a drop in its profit but also announced an end to a movie deal with Netflix as it plans to start its own streaming service.