North Korea Fears Drag Asia Stocks Further Down

The North Korean nuclear crisis dragged Asian markets further into the red on Wednesday as world powers struggled to agree how to deal with the isolated state, while doubts about further US interest rate hikes dragged the dollar.

With few other catalysts to deflect attention from the face off with Pyongyang, investors continue to flock to safe-haven assets, sending gold to near one-year highs and the yen flying, AFP reported.

UN Secretary General Antonio Guterres warned against “confrontational rhetoric” towards Kim Jong-un’s regime and called for a single strategy to address the crisis issue following Sunday’s apparent test of a massive nuclear device.

While the heated rhetoric of the previous two days has cooled, there are fears of a fresh flare up as the North is feared to be preparing another missile launch to mark its foundation day on Saturday.

US markets returned from their long Labor Day weekend on Tuesday to finish sharply lower and US Treasury yields are at one-year lows.

In Asia on Wednesday Seoul shed 0.3%, Tokyo ended the morning session 0.3% lower and Hong Kong gave up 0.9%. Shanghai was 0.4% lower and Sydney gave up 0.1%.

Indian shares also fell on Wednesday over North Korea tensions. BSE Sensex trade was lower by 111 points, or 0.35%, to 31,698, while the Nifty 50 fell 28 points, or 0.28%, to 9,925.

Most Southeast Asian stock markets fell on Wednesday. Philippine shares fell nearly 1%, led by losses in financials and industrials. Index heavyweights SM Investments and Bank of the Philippine Islands fell 1.6% and 1.7%, respectively.

Singapore shares fell 0.6%, with financials accounting for most of the losses. DBS Group Holdings fell 0.8%, while Oversea-Chinese Banking Corp fell 1.1%.

Indonesian shares also fell 0.2% while Thai shares were down marginally.

The dollar, already down against the safe-bet yen on geopolitical concerns, took another hit from comments by federal reserve officials playing down the chances of a third rate hike of the year.

Fed Governor Lael Brainard said the central bank had continued to miss its 2% inflation target for the past year and added: “My view is that we should be cautious about tightening policy further until we are confident inflation is on track to achieve our target.”

In early trade Wednesday the dollar was at 108.70 yen, heading towards its weakest levels of the year.