You are here

Asia: Traders cautious after sell-off as North Korea tensions linger

[HONG KONG] Asian markets struggled on Tuesday while the safe-haven yen and gold held gains as traders fret over North Korea's nuclear test at the weekend, which prompted warnings of US military action.

The US ambassador to the United Nations Nikki Haley told an emergency Security Council meeting that Pyongyang was "begging for war" and called for the "strongest possible measures" against Kim Jong-Un's regime.

Also, US President Donald Trump and his South Korean counterpart Moon Jae-In agreed to remove limits on the payload of the South's missiles.

The test, which North Korea says was of a hydrogen bomb, came less than a week after it fired a rocket over Japan, while speculation mounts that it is preparing to launch another.

Market voices on:

Sunday's provocative test sparked heavy selling in Asian stocks Monday and markets were unable to stage any meaningful recovery on Tuesday.

Seoul was barely moved, having shed more than one percent the day before, while Tokyo dropped 0.5 per cent by the break as exporters were weighed by the stronger yen.

Hong Kong was also flat and Shanghai, which managed to eke out gains Monday, eased 0.2 per cent. Wellington and Singapore were slightly higher.

"Investors in Asia have limited leads to follow," Citigroup analysts led by Johanna Chua wrote in a client note, according to Bloomberg News.

They added that the North usually ramps up the belligerence around key anniversaries, the next of which is expected on September 9.

"Tension linger and it's difficult for risk aversion sentiment to disappear," Naoto Ono, a currency analyst at Ueda Harlow in Tokyo, said in a note.

Analysts said traders will be keeping an eye on Wall Street's reaction to the latest events, having been closed Monday for Labor Day.

On currency markets the yen maintained its gains against the dollar as investors sought out safety, while gold held around one-year highs.

However, while tensions are high, Greg McKenna, chief market strategist at AxiTrader, said: "For now, traders and investors are taking the approach that there will be no escalation beyond words.

"Markets will react violently if a military conflict erupts on the Korean peninsula. But overnight it's clear traders are betting that things will de-escalate."