Asia stocks extend rally as North Korea fear recedes

Pedestrians walk in front of a stock quotation board flashing the key Nikkei index of the Tokyo Stock Exchange.
Pedestrians walk in front of a stock quotation board flashing the key Nikkei index of the Tokyo Stock Exchange. PHOTO: AFP

SYDNEY (BLOOMBERG) - An equities rally extended in Asia on Tuesday (Aug 15) 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 such as gold and the yen.

Stock indexes in Australia and Japan climbed after the S&P 500 Index surged 1 per cent overnight. Volatility continued to retreat, with the CBOE Volatility Index, known as the VIX, dropping 21 per cent.

Meanwhile, Federal Reserve Bank of New York chief William Dudley signaled 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 US dollar and Treasury yields a boost.

Japan's Topix index rose 0.7 per cent and Australia's S&P/ASX 200 Index gained 0.8 per cent. Futures on Hong Kong's Hang Seng index added 0.5 per cent.

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

Futures on the S&P 500 were up 0.2 per cent as of 9:03am in Tokyo. The underlying gauge finished up 1 per cent on Monday, when the Nasdaq Composite rose 1.3 per cent.

Markets around the world are recovering from last week, when risk assets fell as tension between North Korea and the US soared. On Monday, US Joint Chiefs of Staff Chairman Joseph Dunford told South Korean President Moon Jae-In that the Trump administration is prioritizing diplomatic efforts to resolve the crisis. Defense Secretary James Mattis said the US would "take out" any missile sent toward American soil, including Guam.

The yen fell 0.3 per cent to 110 per dollar after losing 0.4 per cent on Monday, when the Bloomberg Dollar Spot Index gained 0.3 per cent.

The euro traded at $1.1778.

The yield on 10-year Treasuries increased one basis point to 2.23 per cent.

West Texas Intermediate crude added 0.2 per cent to US$47.60 a barrel. US government data is forecast to show crude stockpiles extended declines during a period of strong seasonal demand, trimming a glut. The contract plunged 2.5 per cent on Monday as fears of falling oil demand in China overshadowed news that Libya's crude supply was disrupted.

Gold sank 0.2 per cent to US$1,279.18 an ounce, after losing 0.6 per cent on Monday.