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Traders return to risk in Asian markets as N Korea tensions abate

Tuesday 03.10 BST

What you need to know

  • Investors dump havens in Asia as North Korea tensions subside
  • Worst performers include yen, gold and government bonds
  • Risk-on mood boosts equities as Tokyo’s Topix rises 1.3 per cent
  • Brent crude oil finds floor in Asia after 2.5 per cent drop on Monday

Leading quote

Investors were walking back from their recent dive into havens on Tuesday as worries over a potential US-North Korea conflict appeared to ease, sending the yen, gold and government bonds weaker and bolstering equities in Asia Pacific.

Hot topic

Investors were reversing their recent push into havens on Tuesday. The yen was 0.5 per cent weaker at ¥110.18, the softest level in five days after having risen as high as ¥108.74 on Friday amid a war of words between Washington and Pyongyang.

Gold lost more of its lustre in Asia after dropping 0.6 per cent on Monday as traders in Europe and the US grew optimistic about their chances of averting nuclear war. The metal slid another 0.6 per cent to $1,274.44 an ounce in Tuesday trade, having touched a nine-week day high on Friday.

The Swiss franc was also 0.1 per cent weaker at SFr0.9733, having weakened 1.1 per cent on Monday.

Equities

Tokyo traders were once again playing catch-up after a delayed fall on Monday due to a Friday holiday that came during a peak in US-North Korea tensions. This time Tokyo’s Topix index was on the upswing, gaining 1.3 per cent in line with other equities indices in the region a day prior.

In Hong Kong the Hang Seng was up 0.3 per cent as risk-on sentiment permeated the market. That extended to Tencent, heavily weighted in the index and up 1.4 per cent ahead of its earnings out on Wednesday and as it recovered from losses brought on by a government probe into its WeChat platform announced last week.

In Sydney, Commonwealth Bank of Australia rose as much as 0.8 per cent after closing 1 per cent higher on Monday. The bank’s board announced its chief executive would step down in the current financial year following allegations of money laundering from the country’s financial regulator. The benchmark S&P/ASX 200 index was up 0.7 per cent.

In New York on Monday the S&P 500 rose 1 per cent to 2,465 — its best one-day gain since April 24 — after falling 1.4 per cent over the previous five sessions, its biggest weekly drop since March.

Forex and fixed income

Currency movements were largely muted outside of renewed weakness for the yen, with the Australian dollar firming as much as 0.3 per cent to $0.7877 after minutes from the Reserve Bank of Australia’s August meeting minutes showed it still expected inflation to rise as economic growth picked up.

Government bonds fell as investor appetite for risk returned, driving up yields. The yield on the 10-year US Treasury was up 2 basis points at 2.239 per cent. That on the equivalent Australian note was 4bp higher at 2.653 per cent.

Commodities

Brent crude oil was finding a floor in Asia trading after dropping 2.6 per cent overnight to finish Monday’s session near a 20-day low at $50.73 a barrel after South Korea’s customs service reported a 26.5 per cent year-on-year rise in crude oil imports from Iran in July.

The global benchmark was up 0.2 per cent on Tuesday at $50.84, reversing from a 0.2 per cent drop at the open. West Texas Intermediate, the US marker, was up the same amount at $47.69. It had fallen as much as 2.9 per cent to a 21-day low of $47.43 a barrel on Monday before closing down 2.5 per cent at $47.59.

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