TSX rallies shortly after open as North Korea tensions ease

TSX rallies shortly after open as North Korea tensions ease

Now installed in the White House, Trump issued a new warning to Pyongyang on Thursday that his previous promise to unleash "fire and fury" may not have been strong enough.

That came after USA president Donald Trump hinted at military action over Pyongyang's threat to launch missiles towards the Pacific island of Guam, a United States territory.

Japanese markets were closed for a holiday but the yen powered on, hitting an eight-week high of 108.91 yen to the dollar, adding to its biggest weekly gain since May.

The Korean story has seen the yen gain around 1.5 percent this week, its biggest rise since mid-May.

Bids into the Japanese yen and Swiss franc, currencies that find demand in times of geopolitical anxiety, also tapered.

"The direction in global equities will likely play a major role in the yen's direction today, while the market will also be interested to see what comes of US CPI data".

U.S. 10-year yields inched higher after falling on Friday to six-week lows following data showing that USA consumer prices rose just 0.1% last month, below economists' forecast of a 0.2% gain.

"We do just not know what happens next with the North Korea situation", said BNY Mellon FX strategist Neil Mellor.

Still, with joint South Korean-US military exercises scheduled and North Korea celebrating "Liberation Day" Tuesday, volatility could return to markets, analysts said. "But with the rhetoric having gone to a different level, the market just can't afford to take that risk".

MSCI's world equity index was up 0.75 per cent after its biggest weekly drop since early November and the USA benchmark S&P 500 climbed 1 per cent for its third one percent daily gain in 2017. "The VIX index of implied future volatility on the S+P 500 index (the so-called 'fear index), jumped to a three-month high of over 15, and we saw growth-orientated stocks under-perform their value counterparts across developed stock markets". The euro zone's version is at its highest since April, when France's election was rattling the region.

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Tokyo stocks dropped Monday morning as lingering worries about the war of words between the United States and North Korea offset better-than-expected Japanese economic growth.

"Of course, it's all come at a time when share markets are due for a correction, so North Korea has provided a flawless trigger".

Barrick Gold Corp fell 1.5 per cent to $21.27, while Goldcorp Inc was down 1.1 per cent to $16.31.

Shanghai dipped 0.3 per cent and Hong Kong's Hang Seng lost 1.3 per cent.

Currency markets focused on the U.S. producer price index data due later in the session.

The market's backstop safety asset, gold, edged up to its latest two-month high of $1,288 an ounce.

The Nasdaq Composite was up 70.88 points, or 1.13 percent, at 6,327.44. Copper, the bellwether industrial metal, was set for its first weekly drop in five weeks.

Disappointing US inflation and jobs data have not helped the dollar.

"North Korea gets the headlines, but don't forget that we are closing the door on a very impressive earnings season", Ryan Detrick, senior market strategist at LPL Financial.