Amid the escalation in rhetoric between Pyongyang and Washington this year, investors have been for the most part able to keep the big picture in mind: the only realistic option for the US and North Korea is to sit down for talks at some point. Military options are not actually on the table despite talk.
But the nature and timing of the latest missile test from the North – over Japan and right after tensions seemed to be cooling dramatically – have increased the fear of a miscalculation or accident coming from either side. At least for some.
South Korean and Japanese markets were more resilient Tuesday than those in Europe with the KOSPI and Nikkei recovering to close down just 0.23% and 0.45%, respectively. As David Goldman notes this morning, Japanese stocks were actually up in dollar terms (measured by the broader TOPIX index), Hang Seng was down 0.35%, ASX down 0.65%.
Stocks in Europe were hit much harder with the DAX down 1.67% just before 2 pm local time, while the Euro Stoxx 600 is down 1.27%. The euro broke the US$1.20 mark, the direction it was headed anyway. Gold is up 0.88%.