European stocks followed most Asian equities higher as tensions surrounding North Korea eased. The yen dropped as demand for safe-haven assets began to fade, although gold and the Swiss franc held most of Tuesday’s gains.
Almost every sector of the Stoxx Europe 600 Index advanced after President Donald Trump’s measured response to North Korea’s missile launch and comments from Kim Jong Un suggested the situation won’t escalate. Equity indexes in Japan, Hong Kong and South Korea rose, while US stock futures were also green. Most bonds fell as the risk-off mood ebbed. The euro weakened and the dollar gained as Goldman Sachs Asset Management called the greenback “ very, very attractive.”
Kim said Wednesday the missile was fired in protest at annual military exercises between the US and South Korea. Coupled with Trump’s tempered remarks—the president said the US will consider “all options” in its response to the provocation—investors judged the standoff is unlikely to intensify, helping to underpin risk assets.
“We’ve seen the typical reaction that you would expect yesterday, with the safe-haven assets like the yen gaining and the Korean won obviously weakening and equity markets in this region selling off,” Khoon Goh, Australia & New Zealand Banking Group Ltd.’s head of Asia research, said in a Bloomberg Television interview. “What’s interesting is that the reaction has been fairly muted and a lot of the moves have largely reversed and I think it’s a case now where what’s happening with North Korea is not necessarily new.”
The Stoxx Europe 600 Index rose 0.5 percent as of 9:46 a.m. in London, the largest advance in more than a week on a closing basis. The UK’s FTSE 100 Index rose 0.3 percent, the biggest advance in more than a week. Germany’s DAX Index rose 0.6 percent, the largest advance in more than a week. Futures on the S&P 500 Index rose 0.1 percent.
West Texas Intermediate crude dipped 0.6 percent to $46.14 a barrel, the lowest in almost six weeks. Gold rose less than 0.05 percent to $1,309.75 an ounce. Gasoline for September delivery rose 3 percent to $1.8371 a gallon.
“The ‘risk off’ sentiment that overshadowed markets after the launch of yet another missile from North Korea didn’t even last 24 hours,” David de Garis, director at National Australia Bank, said in a commentary.
The dollar plunged Tuesday to as low as 108.50 yen as dealers rushed for safe investments but managed to bounce back later in the day and was at 110 yen in Asia Wednesday.
The greenback also picked up against the euro, a day after the single currency broke above $1.2000 for the first time since January 2015. The euro has been boosted by expectations the European Central Bank will soon start cutting down its stimulus, while talk of fresh Federal Reserve interest rate rises has eased.
The US unit was supported by bargain-buying and a strong consumer confidence reading, while dealers are upbeat about upcoming US jobs data on Friday.
However Satou Masakazu, senior analyst at Gaitame Online, said that “in the long run, the euro-buying sentiment remains strong.”