Markets recover after Korea shock and ahead of US GDP – business live

Good morning, and welcome to our rolling coverage of the latest news from the world economy, the financial markets, the eurozone and business.

Stock markets look a little calmer after Monday’s slide in the wake of North Korea’s provocative missile launch over Japan. Investors took some reassurance from President Trump’s relatively measured response. Stating that “all options are on the table” is a lot less bellicose than promising “fire and fury”, so after an early fall the Dow Jones Industrial Average actually ended in positive territory, up 0.26%.

The positive mood has filtered through to Asia, with the Hang Seng up 0.94% and the Nikkei 225 0.72% better. So European markets are expected to recover a little of Monday’s lost ground:

But some believe the markets may be too calm, given the tensions with North Korea and the country’s promise of more action in the region. Michael Hewson, chief market analyst at CMC Markets UK, said:

Having seen stock markets in Asia and Europe drop sharply and the traditional haven trades rally in the aftermath of North Korea’s provocative missile launch over Japan earlier this week, it wouldn’t have been a surprise to see US markets follow suit.

Despite the escalation in tension and the universal condemnation the missile launch has provoked, US markets, despite initially opening sharply lower, rallied strongly in the afternoon session to close the day higher.

It is true that flare ups on the Korean peninsula are nothing new and previous instances have always resulted in a winding back of tension, and it would appear that US investors have decided that recent events are likely to go the same way, as the markets “muscle memory” of selling the panic and then buying the dip kicked in.

In ordinary circumstances this might seem sensible, however the events of the last few weeks can hardly be described as ordinary, which suggests that markets could be being rather naïve that current events can be contained.

President Trump of course also has to contend with the devastating floods from tropical storm Harvey, both the damage done and the cost to the US economy. Our live coverage of the impact of the storm is here:

On top of that, he is expected to give more details of his long awaited tax reform programme.

It is also a fairly busy day for data as the month comes to and end. Still with the US, there are second quarter GDP figures and the latest private payroll numbers, which are scoured for clues to Friday’s non-farm payroll numbers.

In the UK there are the latest bank lending and mortgage figures, and in Germany, inflation data for August.

The Agenda:

9.30 BST UK consumer credit and mortgage lending (July)

10.00 BST Eurozone confidence figures (August)

13.00 BST German inflation (August)

13.15 BST US ADP employment data (August)

13.30 BST US GDP (second quarter)