The Big Question: How will the US respond to the latest missile test by North Korea?
Major equity markets in Asia suffered from a North Korean ballistic missile that flew over Japan early Tuesday morning, as investors in the region went into a risk-off mode, searching for safe-haven assets.
The South Korean stock market saw the steepest fall, as the benchmark KOSPI plunged 1.13 percent to 2343.60 before midday.
In Japan, the Nikkei 225 was down 0.61 percent, trading at 19,330.95 before midday.
Down under, the ASX 200 also dropped 0.91 percent to 5,657.80.
However, in Greater China, the stocks were mixed. The Shanghai Composite Index gained a slight 0.20 percent to 3,366.13 and the Hong Kong Hang Seng Index was down 0.46 percent, trading at 27,735.83.
The fall in major Asian markets came after North Korea fired a ballistic missile over Japan on Tuesday morning. Such launch over Japan is said to be the first since 2009.
A Japanese government spokesman called the launch “unprecedented, grave and a serious threat” to the country.
The move also highlighted that the North Korean regime is far from backing down on its missile or even nuclear program, despite recent sanctions approved by the UN Security Council.
That prospect of further intensified tension on the Korean Peninsula has rattled investors, who will most likely seek for safe-haven assets such as gold and US Treasury notes.
The missile launch already pushed gold prices up as much as 0.55 percent at $1,316.43 during the Asian trading session.
That could be just the beginning as investors are now waiting for a response from US President Donald Trump, who had previously warned of “fire and fury.” If the US responds to the latest launch with more than words, global markets could enter a risk-off mode.
Market-sensitive news this week to watch: 1. US response to North Korea’s missile launch; 2. Impact of Hurricane Harvey off the US Gulf Coast; 3. Economic data from Japan, the US, Hong Kong and Australia later in the week; 4. NAFTA talks; 5. UK’s Brexit talks with the EU; 6. Talks of tax reform in the US.
Main Market Movers – Mid-day Asian Trading Session
|Indexes||Value at Midday||Daily Change|
|Japan-Nikkei Stock Average 225||19,330.95||-0.61%|
|China-Shanghai Composite Index||3,366.13||0.2%|
|Hong Kong-Hang Seng||27,735.83||-0.46%|
|South Korea- KOSPI||2,343.60||-1.13%|
The bitcoin price is nearly unchanged in the Asian trading session, trading at $4,380.
Ethereum gained 0.48 percent to $348.75, after moving up from about $343 the night before.
The Japanese yen gained 0.38 percent against the US dollar at Midday. The USD/JPY rate was at 108.81. The gain came after the North Korea missile launch. The yen had previously lost to as much as 108.86 in early morning trading before it rebounded.
The Chinese yuan strengthened marginally against the greenback, trading at 6.6078 per dollar. The yuan has been rising quite consistently against the dollar since Friday, when the yuan was trading at as high as 6.6667 per dollar.
The Australian dollar lost 0.15 percent against the US dollar. The Australian dollar was trading at 1.2614 per dollar before midday.
WTI Oil was down 0.04 percent at $46.77 per barrel.
Brent Crude gained 0.19 percent to $52.07 per barrel.
Gold gained 0.53 percent to $1,316 per ounce.
Business News across Asia
In China, more mergers among State-owned companies. The Chinese government has approved a merger between the two energy giants China Guodian Group Corp and Shenhua Group. The two will form a new joint venture focusing on energy investment. Shenhua’s shares in Hong Kong gained 1.7 percent on Tuesday, while Guodian’s Hong Kong shares were down 1.8 percent in early hours of the Asian trading session.
Take away: The move, followed a few recent high-profile mergers among State-owned companies, highlighted the government’s determination to push forward reforms of the state-owned companies to improve efficiency. The moves will also give private investors a shot in these companies and actually have a stronger say in the decision-making.
In Japan, investors and government officials are stunned over North Korea’s latest missile that flew over North Japan’s Hokkaido Island. The government has responded in tough words, warning grave threats but has not announced any response in action.
Take Away: Japan is unlikely to move ahead with any action on its own, it will consult with the US before any concrete decision. However, that uncertainty might further rattle investors.
In India, the Indian Commodity Exchange has launched the world’s first derivatives trading platform for diamonds. The move is aimed at forming a transparent pricing mechanism for the precious stone. On the first day of trading, more than 3,000 contracts were traded.
Take Away: Though details on the platform still remain murky, this could mean there is a new alternative to gold and other precious metals.
Also noteworthy, a lengthy stand-off between China and India on the border has ended peacefully on Monday, after the troops were withdrawn from the disputed area. Though India and China have different versions of who withdrew from the area, the move, coming ahead a BRICS Summit in China over the weekend, cleared up some tension between the leaders ahead of the summit.