North Korea’s missile hits markets
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North Korea’s missile hits markets

North Korea has fired a ballistic missile over Japan, causing tremors of worry across global markets. The Japanese government called Kim Jong Un’s latest provocation “an unprecedented, grave, and serious threat,” and appealed to the United Nations Security Council to call an emergency meeting. U.S. President Donald Trump has reiterated that “all options” remain on the table in response to the missile’s firing.

Markets were sluggish on Monday

north korea market 30082017 

Source: Bloomberg

Just days after U.S. secretary of state Rex Tillerson praised the North Korean government for its “restraint”, President Trump was forced to return to the rhetoric that dominated news cycles a few weeks ago. In a prepared statement, he said:

“The world has received North Korea’s latest message loud and clear: this regime has signaled its contempt for its neighbours, for all members of the United Nations, and for minimum standards of acceptable international behavior. Threatening and destabilixing actions only increase the North Korean regime’s isolation in the region and among all nations of the world. All options are on the table.”

Despite geopolitical concerns, the market has had a strong year so far

 north korea graph 30082017

Source: Bloomberg

Chihiro Ohta, the Tokyo-based senior strategist at SMBC Nikko Securities, said: “Some observers had thought the U.S. and North Korea were pursuing discussions behind closed doors, but it turns out North Korea continues to pursue missile development. The risk-off stance is likely to continue even if the U.S. responds calmly.”

While this is the first time that a North Korean missile has flown over Japan since 1998, it is worth remembering that sabre rattling from the country’s regime is not uncommon in the first six to twelve months of a new U.S. President’s term.

Disclosure
The opinions in this article do not reflect those of Dominion Fund Management Limited, and in the instance of any forward-looking statements, these should not be construed as advice.


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