Gold Up As US-North Korea Tensions Hit Sentiment

Stocks in London ended lower on Friday, at the end of a week marked by the escalating tensions between the US and North Korea, which sent investors away from riskier assets such as equities, moving to safe havens like gold.

The FTSE 100 index closed down 1.1%, or 79.88 points, at 7,309.96. The blue-chip index ended the week down 2.7%. The FTSE 250 ended down 0.8%, or 154.63 points, at 19,544.79, and down 2.1% for the week as a whole. The AIM All-Share closed down 1.1%, or 10.64 points, at 988.99, down 0.5% for the week.

The BATS UK 100 ended down 1.1% at 12,411.13, the BATS 250 closed down 0.8% at 17,756.36, and the BATS Small Companies ended 0.3% lower at 12,174.77.
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The CAC 40 in Paris ended down 1.1%, while the DAX 30 in Frankfurt ended marginally lower.

Stocks in Europe followed their US and Asian counterparts lower on Friday, as heated rhetoric between US President Donald Trump and the North Korean regime has sent equity markets falling globally since Wednesday.

In Asia, the Japanese Nikkei 225 index closed down 0.1% on Friday. In China, the Shanghai Composite ended down 1.6%, while the Hang Seng index in Hong Kong fell 2.0%.

The US military's options are "locked and loaded," Trump said on Friday in a warning to North Korea if it decided to "act unwisely." Trump had doubled down on his harsh words against North Korea on Thursday, saying his "fire and fury" warning against the Pyongyang regime earlier this week "wasn't tough enough."

"It's about time somebody stuck up for the people of this country and the people of other countries, so if anything, maybe that statement wasn't tough enough," Trump told reporters at his golf resort in Bedminster, New Jersey, where he is on vacation.

North Korea has threatened to attack the US territory of Guam in the western Pacific amid an escalating war of words over its nuclear programme and a series of recent missile tests.

US Defence Secretary James Mattis, meanwhile, warned that a war would be "catastrophic," and that a "diplomatically-led effort to get this under control" was "gaining traction."

Trump declined to say whether the US might consider a pre-emptive strike against North Korea, but said he was still open to negotiation.

Despite the risk-off attitude in the market, stocks in New York were taking back some losses at the London equities close, as bargain hunters entered the market following steep falls in US stock indices earlier this week.

At the London equities close, the Dow Jones Industrial Average was up 0.1%, the S&P 500 index up 0.2% and the Nasdaq Composite up 0.3%.

Gold continued to benefit from risk aversion, with the precious metal standing at USD1,286.67 an ounce at the London equities close compared to USD1,268.44 an ounce on Thursday.

On the macroeconomic front, data from the US Labor Department showed that consumer price index inched up by 0.1% in July after coming in unchanged in June. Economists had expected prices to rise by 0.2%. Excluding food and energy prices, core consumer prices still crept up by 0.1% in July, matching the increases seen in the three previous months. Core prices had also been expected to climb by 0.2%.

"The CPI data was very muted and not something which the Federal Reserve is going to be happy to look at," said Think Markets analyst Naeem Aslam.

"The next Fed rate move is under question and the inflation equation is going to help the doves on the committee. If you look at the gold price after the CPI data, it tells you that the Fed is not going to be in any rush to increase the interest rate this year. Perhaps we are done with the interest rate for this year," Aslam noted.

The pound was quoted at USD1.2972 at the London equities close, compared to USD1.2982 late Thursday. Meanwhile, the euro stood at USD1.1792 at the European equities close, against USD1.1749 on Thursday.

Brent was quoted at USD51.62 a barrel at the close, slightly lower than USD52.46 a barrel at the close on Thursday.

On the London Stock Exchange, miners were the main drag for the FTSE 100. The FTSE 350 Mining sector index ended down 2.7%, the worst performing sector index, with Antofagasta the biggest loser, down 4.4%.

Old Mutual fell 2.3%. The Anglo-South African insurer and investment group said its interim profit and revenue grew strongly, but said it is taking a careful approach to dividends as it prepares to separate out its operations.

Pretax profit in the six months to the end of June grew to GBP940.0 million from GBP534.0 million in the first half of 2016. Total adjusted operating profit rose 37% to GBP969.0 million from GBP708.0 million year-on-year.

Revenue rose to GBP10.82 billion from GBP7.48 billion. The greatest contributors were investment return, which rose to GBP4.83 billion from GBP3.00 billion, and banking interest, which climbed to GBP2.36 billion from GBP1.61 billion.

Old Mutual will pay an interim dividend of 3.53 pence, which it said is a 32% increase year-on-year. However, the company said it is taking a "cautious" approach to the dividend due to capital management needs, and expects the full-year dividend to be towards "the upper end" of its range of 2.5 times to 3.5 times cover.

Shire fell 1.1%, as the pharmaceutical firm shares were hit by a downgrade to Equal Weight from Overweight by Barclays.

In the FTSE 250, Hastings ended up 2.3% after JPMorgan lifted the insurer to Overweight from Neutral.

Domino's Pizza ended down 3.4%. The pizza delivery company said it will pay GBP24.0 million for a three quarter stake in 25 London stores to "take advantage of the significant growth opportunity" in the capital. The firm will buy 75% stake in a new company set up with the franchisee and the deal is expected to complete in September.

This equates to about GBP1.3 million per store, which analysts at Numis said is broadly equivalent to 65 times the average weekly unit sales of mature stores, typical of Domino's recent transactions. The franchisee is not one of Domino's two main franchisees in the UK and it will manage the 25 stores on a day-to-day basis.

However, analysts at UBS Evidence Lab said Domino's market position is challenged with growing competition and UK consumer weakness, and that investment was needed to simply maintain its market position.

The UK corporate calendar is thin on Monday, with FTSE 250-listed integrated shipping services firm Clarkson reporting interim results.

The economic calendar is also thin with Japan GDP data at 0050 BST and China retail sales at 0300 BST, together with industrial production data. Meanwhile, eurozone industrial production is at 1000 BST.