By Joyce Yu
Wall Street ran out of steam following an initial lead due to geopolitical tensions, seeing its rally coming to an end.
The Dow retreated after tension between the US and North Korea escalated, sending the index to 22085.34 points, down 33.08 points or 0.15%. The Dow failed to push the streak of records to 10, something that has only happened four other times since the Dow was established in 1896, according to Bespoke Investment Group.
Asian indexes dropped Wednesday. Japan’s Nikki sled 1.29 percent while Hong Kong’s Heng Seng dipped 0.5%.
Stephen Innes, a senior trader at online broker Oanda, told CNN that “Regional sentiment was dented for sure.”
He further added that the moves were “nothing I would panic too quickly about just yet,” noting that they may have been exaggerated by the relatively light trading volumes that are typical in August.
Despite the retreat, the markets seem to remain resilient to the heightened tensions between the U.S. and North Korea in recent months, according to analysts.
“The North Korea issue has been ongoing for a few years, so I think investors seem not to be too bothered by this kind of development,” said Pu Yonghao, chief investment officer at asset management firm Fountainhead Partners in Hong Kong.
Pu described Wednesday’s declines as “a pullback” by investors using the North Korea tensions as an excuse to lock in recent gains.
Besides geopolitical turmoil, China’s July trade data weighted on the global equity markets.
Reuter reported that Chinese exports in July rose 7.2 percent in dollar terms while imports increased 11.0 percent in dollar terms. These are lower than analysts’ forecasts polled by Reuters that expected to see a 10.9 percent rise in Chinese exports and an increase of 16.6 percent imports in dollar terms.
Julian Evans-Pritchard at Capital Economics said that the Chinese trade growth now appeared to be on a downward trend despite an uptick at the end of the second quarter.
He told the Reuters that “In particular, the sharp decline in import growth since the start of the year suggests that domestic demand is softening. We think further downside to export growth should be relatively limited, given the positive outlook for China’s main trading partners. But with the headwinds to domestic demand from policy tightening increasing, we think the slowdown in import growth has further to run.”
Asian markets were mixed on Tuesday. Japan’s Nikkei 225 slipped 0.30 percent, Australia’s S&P/ASX 200 fell 0.52 percent. Hong Kong’s Hang Seng Index and the Shanghai Composite gained 0.57 percent and 0.11 percent respectively, while Shenzhen Composite rose 0.367 percent.
Nevertheless, the miss in dollar-denominated numbers were “not entirely disappointing” as the moderation in trade growth had been anticipated to some extent, Mizuho Bank head of economics and strategy Vishnu Varathan told CNBC.
“The known unknown of how China manages its credit rationalization in view of financial de-risking is far more critical to the economy than an expected moderation in trade,” Varathan added.
