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gold nikkei north korea S&P 500

‘Nuclear Reaction’: S&P, Nikkei Futs Fall, Gold Rises As Markets Warily Eye Pyongyang

These things have a way of reversing themselves in the overnight as investors have been conditioned to fade the initial reaction to North Korea news, but that will be tested given the severity of the provocation. 

Aaand, here’s comes the rest of the (nuclear) reaction…

Earlier we noted the knee-jerk in USDJPY which predictably slid hard in early trading as everyone got their first opportunity to express profound displeasure at North Korea’s latest (and “greatest”) provocation.

Well, here’s S&P and Nikkei futs:

NikkeiES

And here’s gold and USDJPY again:

YenGold

These things have a way of reversing themselves in the overnight as investors have been conditioned to fade the initial reaction to North Korea news, but that will be tested given the severity of the provocation.

Additionally, note that Trump’s threat to stop trading with countries that “do business” with Pyongyang comes at an interesting time for the yuan and Chinese equities, both of which are riding ‘big league’ hot streaks.

Here’s a bit of color from Bloomberg’s Mark Cranfield:

Asian traders will be considering how much to price in from Donald Trump’s threat to halt trade with any nation doing business with North Korea, or whether to wait for more evidence that he will actually follow through with meaningful curbs against China or South Korea. Treasury futures, yen, yuan, won and related equity markets will all be barometers of how risk averse investors are.  Making money from adopting a bearish stance to Asian asset markets on North Korea missile launches has required fast reactions from investors, which may account for the timid response being seen thus far. USD/JPY has already recovered half of its loss after it gapped lower from Friday’s close. Traders will get a sense that markets are entering a new dimension of fear if there are breaches of the recent high for December 10-year Treasury futures at 127-10+ or the low for USD/JPY at 108.27.

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