[HONG KONG] Most Asian stock markets turned lower on Friday after another missile launch by North Korea stoked the possibility of fresh geopolitical tensions while the pound held its gains on bets that British interest rates will rise next month.
Pyongyang launched its second rocket over Japan’s Hokkaido in as many months, just days after the UN Security Council imposed sanctions in response to its nuclear test.
Analysts said the rocket travelled further than any other it has fired, adding to concerns about the North’s ability to strike the US mainland with an atomic bomb.
The news rattled regional markets, which had started to enjoy a return to optimism after last week’s global sell-off sparked by the nuclear test that fanned fears of a regional conflict.
Market voices on:
Seoul fell 0.4 per cent while the Korean won also dipped 0.1 per cent but Tokyo edged up 0.1 per cent on yen weakness.
Hong Kong sank 0.7 per cent, Shanghai shed 0.4 per cent and Singapore lost 0.5 per cent while Sydney was 0.6 per cent off. Wellington, Taipei and Manila were also lower.
However, while investors ran for cover, analysts were less startled by the latest move.
“I wouldn’t necessarily say this is an escalation,” James Soutter, portfolio manager at K2 Asset Management in Melbourne, told Bloomberg News.
“This is more of a continuance of provocation. Hence markets won’t like it, but I don’t think it’s necessarily the precursor to a sustained market pullback.”
POUND HOLDS GAINS
On currency markets the pound maintained its strength against the dollar after the Bank of England (BoE) surprised everyone with a hawkish statement in its latest policy meeting.
While it left borrowing costs unchanged, it’s governor Mark Carney hinted at an lift next month by saying the “possibility is definitely increased”.
His comments came after data this week showed inflation surged last month to 2.9 per cent, well up from the BoE’s two per cent target, as the weaker pound made goods more expensive.
On the day the new ten pound note went into circulation, sterling soared to more than one-year highs above US$1.34 on Thursday, from around US$1.32 earlier, with a strong US inflation print unable to temper sterling rally. The British unit dipped marginally in Asia.
The possible BoE move to tightening comes as central banks consider similar moves as the world economy slowly improves.
European Central Bank officials’ plans to wind-down its crisis-era stimulus has sent the euro flying, while Canada announced a surprise hike earlier this month.
The shift to tighter policies has beared on the dollar, which for years benefited from a US recovery that fuelled talk the Federal Reserve would lift rates.
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