Stocks in Asia Pacific have tumbled as concerns about the tensions between the United States and North Korea took its toll on the markets.
The Nikkei share average fell 0.7% to a four-month low in Tokyo on Wednesday while in Sydney the ASX200 benchmark index plunged by the same margin as investors opted for safe havens such as gold and government bonds.
The South Korean benchmark index – the Kospi – was 0.3% lower on Wednesday in the fifth successive day of losses.
The moves followed heavy losses on Wall Street on Tuesday where stocks suffered their worst day in almost three weeks.
Bank shares led the slide as bond yields slumped on the influx of cash into treasuries. Technology stocks, the biggest gainers this year, also pulled the market lower. Spot gold was 0.2% higher at $1,341.31 an ounce after touching $1,344.21 overnight, its highest since September 2016.
“The risk-off trade really is North Korea front and centre,” said Jeff Zipper, managing director of investments at US Bank Private Wealth Management. “Also you have the hurricane last week and the upcoming hurricane Irma, so there’s a lot on the plate for the market to digest.”
Geopolitical concerns continued to simmer following North Korea’s biggest-ever nuclear test on Sunday, with one of the country’s most senior diplomats saying that the US would receive more “gift packages” from the regime.
Han Tae Song, the country’s ambassador to the United Nations in Geneva, confirmed that North Korea had successfully conducted its sixth and largest nuclear bomb test on Sunday.
“The recent self-defence measures by my country … are a gift package addressed to none other than the US,” Han told a disarmament conference in Geneva on Tuesday.
“The US will receive more ‘gift packages’ … as long as it relies on reckless provocations and futile attempts to put pressure on [North Korea],” he added.
The Nikkei suffered heavy selling when it opened for business on Wednesday, falling to 19,254.67, the lowest level since 1 May. It recovered slightly during the morning but the continued strength of the yen, which is being forced up by the US dollar’s continued weakness, is weighing on the Nikkei’s export-heavy listings.
Chris Weston of IG Markets in Melbourne said there was a “triple threat of negative catalysts” bearing down on market sentiment and which were culminating in the decreasing likelihood of a US fed rate hike in December. He cited dovish comments by US Fed member Lael Brainard about the chances of the rate increase, Donald Trump’s pledge of more military hardware for South Korea and poor US factory orders.