By Joyce Yu
Philadelphia, PA–US Stocks slipped with the Nasdaq falling by nearly 1% on Monday. U.S. stock futures were flat overnight and opened slightly higher this morning.
“Demand for safe havens returned on Monday, as a new war of words between North Korea and the U.S. triggered a flight to safety amongst investors,” said Hussein Sayed, chief market strategist at FXTM.
“So far, every aggressive sell off in equities and move to safe havens on geopolitical risks, has proven to be short-lived,” he shared with the CNN.
European stocks were mixed in early sessions on Tuesday while Asian markets were muted.
Crude prices soared after Turkish President Recep Tayyip Erdogan threatened to shut down a pipeline that carries oil from the semi-autonomous Kurdish region in northern Iraq. U.S. crude futures are trading around $52 a barrel, up about 22% from their recent low of $42.53 in mid-June.
Markets seem to have been oscillating between risk-on and risk-off stances since early August due to political factors such as a new low in U.S. and North Korean relations, rising oil prices, falling tech stocks and the prospect of more guidance from the Federal Reserve on its rate hike plans.
Facebook suffered its biggest fall in 10 months on Monday and the cumulative decline in Apple’s stock price neared 10 percent.
European bourses were flat despite solid French data and a softening euro.
“I think we have a classic case of risk-on (to) risk-off across markets,” said Saxo Bank’s head of FX strategy, John Hardy.
“There is a lot being attributed to North Korea but I think there are a lot of other factors here,” he shared with the Reuters, referring to the decline in U.S. tech stocks and the weekend German elections that saw a far-right party enter parliament.
Markets will also monitor the speech by Fed chair Janet Yellen where investors will look for clues of Fed’s plans to raise interest rates again in December. The dollar strengthened.
Views on US inflation remain mixed.
“Investors are not fully up to speed with the risk of hawkish signals from Fed officials,” Mizuho strategist Antoine Bouvet told the Reuters.
“The Fed is back in a situation where it would want to show optimism at the very least, and the market should be pricing in more hikes in the coming months and quarters than it is currently.”
