Stocks rally as North Korea tensions abate

A trader works on the floor of the New York Stock Exchange (NYSE) ahead of the closing bell.
A trader works on the floor of the New York Stock Exchange (NYSE) ahead of the closing bell. PHOTO: AFP

TOKYO (BLOOMBERG/REUTERS/ AFP) - Asian equities extended gains and the yen tumbled as the prospect of war between the US and North Korea receded, buoying stocks from New York to Tokyo and diverting flows away from haven assets.

Stock indexes from Tokyo to Hong Kong to Sydney climbed after the S&P 500 Index surged 1 per cent.

Measures of equity volatility tumbled in Japan and Hong Kong after the CBOE Volatility Index, known as the VIX, slumped 21 per cent, paring some of last week's surge.

Federal Reserve Bank of New York chief William Dudley signalled another interest-rate increase this year is very much in the cards and suggested the central bank will announce its taper plans next month, giving the dollar and Treasury yields a boost. Japan's currency, a haven in times of global tension, slumped after the Wall Street Journal characterised a North Korean media report as indicating that dictator Kim Jong Un had decided not to launch a threatened missile attack on Guam.

The report, from KCNA on Tuesday (Aug 15), said Kim praised the military for drawing up a "careful plan" to fire missiles towards Guam. Kim was cited by KCNA saying he would watch US' conduct "a little more."

"There's a sense of relief over the North Korean issue with various comments emerging from the US side designed to calm the situation," Toshihiko Matsuno, a senior strategist at SMBC Friend Securities, told Bloomberg News.

"We can expect investors to buy back shares," he added.

Markets in South Korea and India are closed on Tuesday for holidays.

Southeast Asian stock markets, except Singapore, also inched higher as North Korea's leader signalled he would delay plans to fire a missile towards Guam, lifting investor risk appetite after a surge in tensions in the region last week.

"No news from North Korea is good news for the market," said Taye Shim, head of research at Jakarta-based Mirae Asset Sekuritas.

"Our view is that North Korea risk is something that investors will need to live with."

Asian shares rallied for a second day, rising 0.4 per cent.

In Southeast Asia, Philippines rose as much as 0.5 per cent, supported by financials and real estate stocks. Megaworld Corp rose as much as 2.9 per cent, while Robinsons Land Corp gained 1.9 percent.

Malaysian shares edged as much as 0.1 per cent higher, led by consumer discretionary and telecom stocks. Genting Malaysia and AMMB Holdings were among the top performers.

Indonesia extended gains into a second day, rising as much as 0.4 per cent. Advancing issues outnumbered declining ones by 1.6:1.

"We saw some encouraging rebound in the Indonesian market as investors reversed their risk-off bias," Shim said.

Singapore stocks fell 0.3 per cent, hurt by financials, with Oversea-Chinese Banking Corp falling as much as 1.3 per cent and DBS Group Holdings slipping 1.1 per cent.