Safe Havens Benefit from Geopolitical Worries

Mounting geopolitical tensions between the USA and North Korea has seen investors move away from riskier assets such as equities to safe havens like gold. Yesterday, the market took out last week's high at $1280.30.

US Defence Secretary Jim Mattis told Pyongyang it should stop any actions that would lead to the "end of its regime and the destruction of its people".

But the prospect of hefty losses on Wall Street stocks was averted when U.S. secretary of state Rex Tillerson said there was "no imminent threat of war" and that Americans could "sleep well at night". The Dow Jones industrial average slid 0.2 percent to 22,048.70. Small-company stocks fell more than the rest of the market.

As reported at 10:58 am (JST) in Tokyo, the USD/CHF was trading at 0.96 Swiss Francs, a gain of 0.17%.

Emerging market stocks lost 1.03 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.63 per cent lower, while Japan's Nikkei lost 1.29 per cent.

The franc was not the only beneficiary to the risk-off sentiment sweeping markets.

Gold surged to almost a two-month high on Wednesday as tensions rattled throughout global markets. "Safe-havens are bid and markets are a little uneasy". The Swiss franc is up close to 1.5%, its strongest one-day rise since 2015, and gold is up 1% to $1275 per ounce, its highest level for eight weeks.

Against the dollar, the franc surged 0.6 percent to 0.9688 francs, reversing a two-week losing streak.

The Japanese yen strengthened 0.08 per cent versus the greenback at 110.00 per dollar. Japan is the world's biggest creditor country and there is an assumption investors there will repatriate funds in a crisis. Preliminary Unit Labor Costs, the annualized change in the price businesses pay for labor, came in below expectations at 0.6%, below the 1.1% forecast. The euro fell to $1.1735 from $1.1757.

Yields on core government debt fell. The 10-year German bund yield traded at 0.43 percent while the 10-year US yield declined to 2.243 percent.

German and USA sovereign bond prices also rose on the fear trade, sending yields lower despite recent strong readings of economic growth. Asian stocks were mostly lower in Thursday trading, as investors began to digest worries over the escalating tensions caused by North Korea's nuclear ambitions.

Oil prices edged higher after a report showed U.S. refineries processed record amounts of crude in the latest week, eating into inventories, although a surprise jump in gasoline stockpiles limited gains. Brent crude, used to price global oils, added 4 cents to $52.74.

Gold hit its highest level in nearly two months after Trump added to the geopolitical anxiety by boasting of the strength of the U.S. nuclear arsenal.

Gold rose 0.6% to $1,268 (£976) an ounce and platinum gained 0.6% to reach $972.95 an ounce, having hit its highest since April at $979.

December Comex Gold futures settled at $1279.30, up $16.70 or +1.32%. The Nasdaq composite lost 0.3 percent to 6,352.33.

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