Asia stocks stay under pressure after selloff on North Korea fears

A currency dealer in front of electronic boards showing the Korea Composite Stock Price Index at a dealing room of a bank in Seoul.
A currency dealer in front of electronic boards showing the Korea Composite Stock Price Index at a dealing room of a bank in Seoul.PHOTO: REUTERS

TOKYO (REUTERS) - Stock markets were under pressure on Tuesday (Sept 5) after a global selloff the previous day in the wake of North Korea's most powerful nuclear test at the weekend, while safe havens such as gold remained firm.

MSCI's broadest index of Asia-Pacific shares outside Japan was off 0.05 per cent having shed 0.8 per cent the previous day, with South Korea's Kospi was off 0.1 per cent after sliding to three-week lows on Monday.

Japan's Nikkei ticked down 0.2 per cent.

S&P500 mini futures maintained small losses following Pyongyang's nuclear test and last stood at 2,469, 0.2 per cent below their official close on Friday.

US markets were closed on Monday for labor day, and in European stocks extended a selloff that started in Asia.

The pan-European STOXX 600 index and euro zone blue chips both fell 0.5 per cent and all major bourses, from the UK's FTSE to France's CAC 40, posted declines from 0.3 to 0.8 per cent.

The escalating geopolitical tensions kept many investors on edge.

The White House declared on Monday that "all options to address the North Korean threat are on the table" while US Ambassador to the United Nations Nikki Haley urged the 15-member UN Security Council to impose the "strongest possible"sanctions to deter Pyongyang.

"It's not clear whether diplomacy can solve this problem given it has failed for the last 25 years," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "But the US doesn't seem to be ready for a military action soon either. So we are likely to see continued stalemate, which will keep a tab on share prices."

The North Korean fears kept safe-haven assets in demand, with gold fetching US$1,333.9 per ounce, after having hit a 11-month high of US$1,339.8 on Monday.

In the currency market, the yen, which usually gains on risk aversion due to Japan's net creditor nation status, was little change at 109.69 yen to the dollar, not far from Monday's high of 109.22 yen.

The euro maintained its slim gains made on Monday to trade at US$1.1896.

But it kept some distance from a 2-1/2-year high of US$1.2070 hit last week on rising expectations that a stronger euro could slow the European Central Bank's (ECB) plans to rein in its bond-buying stimulus scheme.

Bitcoin dropped further from Saturday's all-time high of US$4,979.9 to trade at US$4,216 after China on Monday banned the practice of raising funds through launches of token-based digital currencies, or so-called initial coin offerings (ICO).

In commodities, copper stood near three-year high while other industrial metals such as nickel were also firm on expectations of solid economic growth in China.

Copper traded at US$6,915.50 a tonne, near Monday's three-year high of US$6,924.

US crude oil prices edged higher while U.S. gasoline prices slumped to pre-Hurricane Harvey levels, as oil refineries and pipelines in the U.S. Gulf Coast slowly resumed activity, easing supply concerns.

US West Texas Intermediate (WTI) crude futures ticked up 0.2 per cent to trade at US$47.38 per barrel as US demand recovered after being hit by reduced refinery activity since Harvey made landfall on Aug 25.

NYMEX gasoline futures dropped back to US$1.6906 a gallon from highs of US$2.1705 touched on Thursday.