World equities, on Tuesday, August 29, crumbled and safe-haven assets jumped after North Korea fired a missile over northern Japan, fuelling worries of fresh tension between Washington and Pyongyang.
The pan-European STOXX 600 index fell more than 1 percent to a six-month low, also weighed down by the surge of the euro above a key level, while U.S. futures fell as much as 0.85 percent on the missile news before paring losses.
Japan’s Nikkei hit a four-month low before paring losses to end 0.5 percent down. South Korea’s Kospi, meanwhile, shed as much as 1.6 percent, helping to drag down MSCI’s broadest index of Asia-Pacific shares outside Japan by 0.5 percent.
“The North Korean escalation has triggered a significant risk-off move,” Alessandro Balsotti, head of asset management at JCI Capital Limited, said in his daily note to clients.
North Korea fired a missile that flew over Japan and landed in the Pacific about 1,180 km (735 miles) off the northern region of Hokkaido in a sharp escalation of tensions on the Korean peninsula.
The dollar was down 0.6 percent at 108.63 yen after hitting its lowest level since mid-April despite Japan’s proximity to North Korea.
The yen tends to benefit during times of geopolitical or financial stress because Japan is the world’s biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis materialize.
Also the safe-haven Swiss franc strengthened, with the dollar falling 0.6 percent to a one-month low against the Swiss currency.
Though the risk-averse mood prevailed broadly across financial markets, the euro appeared immune to the geopolitical news.
The single currency surged above 1.20 to the dollar, breaching a key level as investors grew bullish about its outlook after the head of the European Central Bank refrained from talking about the currency’s recent strength and in the backdrop of brewing U.S. fiscal problems.
Investors also rushed to the safety of U.S. Treasuries, pushing down the 10-year yield to a low of 2.102 percent, its lowest since mid-November, while the yield on Germany’s 10-year government bond fell 3 basis points to 0.34 percent, the lowest since June 28.
