Asia markets pare N. Korea losses, Seoul and Tokyo end up

AFP: Seoul, Tokyo and Hong Kong stocks ended higher yesterday as traders brushed off initial concerns over North Korea’s latest missile launch while most other Asian markets managed to pare their losses.

Pyongyang fired its second rocket over Japan’s Hokkaido in less than a month, just days after the UN Security Council imposed sanctions in response to its nuclear test.

Analysts said the rocket travelled further than any other it has fired, adding to fears about the North’s ability to strike the US mainland with an atomic bomb.

The news rattled regional markets, which had started to enjoy a return to optimism after last week’s global sell-off sparked by the nuclear test that fanned fears of a regional conflict. However, by the end of the day the losses had either been sharply cut back or reversed.

Seoul bounced back to end 0.4 percent higher while the Korean won also made a U-turn to sit 0.1 percent up. Tokyo maintained its gains through the day, rising 0.5 percent as the yen weakened against the dollar on a strong US inflation report. The greenback briefly broke 111 yen for the first time since early August before easing back. 

And Hong Kong rose 0.1 percent but Shanghai shed 0.5 percent, Singapore lost 0.2 percent and Sydney was 0.8 percent off. Wellington and Manila were lower but Taipei rose.

In early European trade, London fell 0.3 percent, while Paris and Frankfurt were each 0.1 percent off.
“I wouldn’t necessarily say this is an escalation,” James Soutter, portfolio manager at K2 Asset Management in Melbourne, told Bloomberg News.

“This is more of a continuance of provocation. Hence markets won’t like it, but I don’t think it’s necessarily the precursor to a sustained market pullback.”

The pound built on gains against the dollar after the Bank of England (BoE) Thursday surprised everyone with a hawkish statement in its latest policy meeting.

While it left borrowing costs unchanged, its governor Mark Carney hinted at a lift next month by saying the “possibility is definitely increased”.

His comments came after data this week showed inflation surged last month to 2.9 percent, well up from the BoE’s two percent target, as the weaker pound made goods more expensive.

On the day the new ten-pound note went into circulation, sterling soared to just above US$1.34 Thursday, from close to $1.32 earlier. And yesterday it extended its run to US $1.3437, its highest since mid-2016.

The possible BoE move to tighten comes as central banks consider similar moves with the world economy slowly improving. 

European Central Bank officials’ plans to wind-down its crisis-era stimulus has sent the euro flying, while Canada announced a surprise hike earlier this month boosting the country’s dollar.

The shift to tighter policies globally has weighed on the dollar, which has for years benefited from a US recovery that fuelled talk the Federal Reserve would lift rates.