Geopolitical tensions returned to the fore after North Korea launched a ballistic missile that flew over Japan on Tuesday. The missile headed in the direction of the Tohoku region before falling in the sea, Japan’s NHK said. The last time a projectile from the hermit state flew over Japan was 2009, according to Reuters.
Demand for traditional safe-haven assets rose following the latest provocation from North Korea, with demand for gold and the Japanese yen picking up in the aftermath of the missile launch.
Spot gold prices rose to their highest in around 10 months on safe-haven demand. The yellow metal fetched as high as $1,322.33 an ounce after trading around the $1,290 handle earlier in the session. Spot gold last traded at $1,315.81.
Meanwhile, the Japanese currency strengthened to trade at 108.56 yen to the dollar at 7:01 a.m. HK/SIN as investors fled to safety.
The yen had more scope to gain against the dollar due to risk aversion, BK Asset Management Managing Director of FX Strategy Kathy Lien said in a note. “If [President Donald] Trump responds with more than harsh words for North Korea, we could see dollar/yen drop as low as 108,” wrote Lien.
Meanwhile, Dow Jones industrial average futures opened more than 100 points lower following the North Korea missile news.
Elsewhere, energy markets continued to process the impact of Tropical Storm Harvey, a downgraded former hurricane. U.S. gasoline futures settled up more than 3 percent at $1.7123 a gallon, Reuters said. Gasoline futures had risen more than 6 percent in the overnight session as refineries in the Houston area were shut down.
Also on the energy front, Brent crude futures shed around 1 percent to settle at $51.89 a barrel and U.S. futures tumbled 2.7 percent to settle at $46.57.
Stateside, oil refinery stocks rose as investors digested the aftermath of Harvey. The Dow Jones industrial average edged down 0.02 percent, or 5.27 points, to close at 21,808.4. Other major indexes recorded slight gains: The S&P 500 added 0.05 percent, or 1.19 points, to end at 2,444.24 and the Nasdaq rose 0.28 percent, or 17.37 points, to close at 6,283.02.
In currencies, the dollar index, which tracks the greenback against a basket of currencies, softened overnight to stand at 92.195 after trading as high as 92.550 earlier in the session.
Investors are also expected to keep an eye on earnings releases in Australia and Hong Kong, with companies such as Shanghai Fosun Pharma and Postal Savings Bank of China expected to report.
The economic calendar for Tuesday is fairly light (all times in HK/SIN):
- 7:30 a.m.: Japan July labor force
- 4:30 p.m.: Hong Kong July retail sales
— CNBC’s Christine Wang contributed to this report.