Wall Street stops stocks' bleeding, for now; gold, yen tick up

Investors looked for cover after strong words by President Trump causing Japan’s Nikkei to drop

The euro was down 0.3 percent at just over $1.17 and nearing a two-week low, while the New Zealand dollar tumbled a full 1 percent as its central bank head bluntly said he wanted it lower.

The last time the S&P closed down more than 1 percent was May 17 when it fell 1.8 percent.

Global benchmark Brent also fell 0.9 per cent to $51.44, after Thursday's 1.5 per cent drop.

Amid the hot rhetoric, USA stocks sold off sharply on Thursday, with the S&P 500 falling more than 1 percent.

The dollar was up 0.05 percent to 109.25 yen JPY=, after earlier falling to a sixteen-week low following data showing USA consumer prices rose less than expected in July.

Trump was responding to North Korea's claim it was completing plans to fire four intermediate-range missiles over Japan to land near the U.S. Pacific territory of Guam.

The hope that the Fed will have to slow its rate-hike path appeared to stop, at least for now, the near $1-trillion loss in world stocks valuations this week triggered by the war of words between Pyongyang and Washington. It has fallen more than 1 percent on only three days this year. "Risk aversion is still very much a concern for markets", said Shaun Osborne, chief currency strategist at Scotiabank in Toronto.

Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a sell-off, and the tensions over North Korea have proved the trigger. According to the Associated Press, South Korea's Kospi lost 1.7 percent, while Hong Kong's Hang Seng slid 2 percent.

The Korean won also continued to skid, down 0.45 per cent to 1,147.2, falling below its 200-day moving average for the first time in a month.

Macy's shares closed down 10.2 percent and Kohl's fell nearly 6 percent as the companies continued to report a drop in quarterly same-store sales, stoking concerns that their turnarounds may still be a long way off.

"We would now be careful with a whiff of risk aversion in the air and, by extension, also stay away from shorts in the rates market", RBC's global macro strategist Peter Schaffrik said.

The yen has also registered its biggest weekly gain since May against the dollar amid speculation that investors of Japan, as the biggest creditor nation, would repatriate their funds should a war break out.

The dollar was further weighed down on Friday by the soft USA inflation data.

German and US sovereign bond prices also rose on the fear trade, sending yields lower despite recent strong readings of economic growth.

The data comes amid tepid inflation that has remained below the Fed's 2% target, despite low unemployment.

The 30-year bond was last up 4/32 in price to yield 2.7871 percent, from 2.794 percent late on Thursday.

Markets saw a tentative recovery in risk appetite in overnight US and early Asian trading, but anxiety mounted again as Asian stocks fell back and London, Frankfurt and Paris dropped 0.5-1.2 percent in Europe. This week has seen its biggest rise since June 2016.

The Dow Jones Industrial Average rose 14.31 points, or 0.07 per cent, to 21,858.32, the S&P 500 gained 3.11 points, or 0.13 per cent, to 2,441.32 while the Nasdaq Composite added 39.68 points, or 0.64 per cent, to 6,256.56.

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