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North Korea’s nuclear test rattles Asian markets, driving gold and the yen higher – CNBC

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Safe haven demand drove up gold and the yen while equities in Asia were pressured by elevated tensions on the Korean Peninsula early on Monday after North Korea said it tested a hydrogen bomb over the weekend.

Japan’s Nikkei 225 declined 0.83 percent.

Across the Korean Strait, the Kospi fell 0.62 percent, but traded above session lows. The earlier sell off in blue chips moderated slightly: Samsung Electronics tumbled 0.43 percent and Hyundai Motor was down 0.35 percent.

South Korean markets have retraced losses fairly quickly in the past following North Korean saber-rattling, but the benchmark index has taken slightly longer to recover after the latest provocations.

Down Under, the S&P/ASX 200 slid 0.31 percent, with declines seen across most sectors. The heavily-weighted financials sub-index was down 0.46 percent, but gold miners rose.

Greater China stocks were mixed, with mainland markets shrugging off geopolitical tensions in the region. Hong Kong’s Hang Seng Index slipped 0.35 percent. On the mainland, the Shanghai Composite rose 0.2 percent and the Shenzhen Composite climbed 0.184 percent.

Malaysia and Vietnam markets are closed for public holidays.

Gold prices and the yen were supported by safe haven demand as markets in the region reacted to North Korea.

Against the Japanese currency, the dollar slid almost 0.5 percent to fetch 109.71 yen at 9:40 a.m. HK/SIN, after falling as low as 109.29 yen earlier in the session. That compared to Friday’s close above the 110 handle.

The Swiss franc, also regarded as a safe haven currency during times of uncertainty, rose to trade at 0.9607 francs to the dollar from the 0.965 handle seen last Friday. The currency strengthened as high as 0.9585 francs to the dollar earlier in the session.

The Korean won fell to its lowest levels in almost two weeks following the ramp up in tensions, tumbling against the dollar to trade at 1,131.88 yen to the dollar. That compared to trades around the 1,120 level seen in the last session.

Meanwhile, spot gold traded at $1,333.31 an ounce after rising to $1,336.79 earlier in the session for its highest levels in around 11 months. The yellow metal had traded at levels around $1,324 in the last session.

Some market watchers suggested that the jump in prices of safe haven assets was a knee-jerk reaction that could soon blow over.

“Unless this is the precursor to U.S. military action — which we doubt — then in a little over a day or two, tensions will calm again, and so will markets,” ING Asia Head of Research Rob Carnell said in a note.

Pedestrians walk past a monitor showing an image of North Korean leader Kim Jong Un in a news program reporting on North Korea's 6th nuclear test on September 3, 2017 in Tokyo, Japan.

North Korea claimed on Sunday that it had conducted a test of a hydrogen bomb meant to be carried by a long-range missile. The test — which the North called a “perfect success” — was estimated to have an explosive yield of up to 100 kilotons, news agency Yonhap reported a South Korean lawmaker as saying.

President Donald Trump called North Korea’s latest test “hostile and dangerous.” When asked about the possibility of a U.S. military attack in response to the North’s latest actions, Trump told a reporter, “We’ll see.”

Trump also suggested on Twitter that the U.S. was considering “stopping all trade with any country doing business with North Korea” as a potential response. The move, if implemented, would likely affect China — North Korea’s most important trading partner.

The Sunday test came on the back of heightened geopolitical tensions in the region. The North had launched a missile that flew over Japan just a few days prior.

Markets also continued to digest weaker-than-expected U.S. employment data released on Friday. U.S. nonfarm payrolls for August showed 156,000 jobs were created, below the 180,000 forecast by economist in a Reuters poll.

Despite the miss, equities in the U.S. closed higher on Friday, with the Dow Jones industrial average rising 0.18 percent, or 39.46 points, to close at 21,987.56.

In corporate news, Malaysia’s Petroliam Nasional Berhad, or Petronas, said on Saturday it was not interested in acquiring a majority stake in Daewoo Engineering & Construction, Reuters reported. South Korean media had reported that Petronas was interested in the deal on Friday. Daewoo shares were down 2.69 percent.

The early surge in Korean defense stocks moderated later during the session. Shares of military systems maker Victek outperformed, jumping 15.09 percent, but other defense plays were subdued: Hanwha Techwin erased earlier gains to decline 1.42 percent while Korea Aerospace was flat.

On the energy front, Brent crude futures declined 0.59 percent to trade at $52.44 a barrel. U.S. West Texas Intermediate tacked on 0.3 percent to trade at at $47.43. Meanwhile, U.S. gasoline futures extended losses made on Friday, falling 0.98 percent to trade at $1.6911 a gallon.

Meanwhile, the dollar index, which tracks the greenback against a basket of six major currencies, was mostly flat at 92.634 at 9:40 a.m. HK/SIN.

The economic calendar for Monday is fairly light, with the only notable data release being Indonesia August CPI due at 12:00 p.m. HK/SIN.

U.S. markets will be closed Monday for Labor Day.

— CNBC’s Leslie Shaffer contributed to this report.

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North Korea’s nuclear test rattles Asian markets, driving gold and the yen higher – CNBC}

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