Miners Add To Falls Amid US-North Korea Tensions

LONDON (Alliance News) - Stocks in London were lower on Friday at midday as risk aversion continues to hit market sentiment amid escalating tensions between the US and North Korea, with the heavyweight mining sector weighing on the FTSE 100, but with Coca Cola HBC extending Thursday's gains.

Stocks in Europe were following their US and Asian counterparts lower, as heated rhetoric between US President Donald Trump and the North Korean regime has sent equity markets falling globally, with investors running to so-called safe havens such as gold.

"As has been the case for much of the week, markets are heading into the weekend on a negative note as traders seek safety ahead of what could be a potential risky couple of days," said Oanda senior market analyst Craig Erlam.

The FTSE 100 index of large caps was down 1.1%, or 83.06 points, at 7,306.88. The mid-cap FTSE 250 index was down 1.1% at 19,487.89. The AIM All-Share index was down 1.3% at 986.84.

The BATS UK 100 index was down 1.1% at 12,411.33, and the BATS 250 was down 1.1% at 17,703.13. The BATS Small Companies was 0.3% lower at 12,173.38.

In mainland Europe, the CAC 40 index in Paris and DAX 30 in Frankfurt at midday were down 1.1% and 0.3%, respectively.\

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

Stocks in New York were pointed lower on Friday, with the Dow Jones Industrial Average seen 0.1% lower. The DJIA closed on Thursday down 0.9%, falling back below the 22,000 line after surpassing it for the first time in its history last week in an impressive rally that lasted nine sessions.

The S&P 500 was pointed down 0.2%, having fallen 1.5% on Thursday, while the Nasdaq Composite was seen down 0.3%, having declined by 2.1% on Thursday.

"The war of words between Trump and North Korean officials has stepped up in recent days and has put investors on edge, prompting a more risk averse approach in the markets. The weekend brings an undefined amount of risk for investors, with the potential for circumstances to escalate both dramatically and unexpectedly at a time when markets are closed," noted Oanda's Erlam.

Trump 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.

Aside from US politics, the economic calendar ahead on Friday features the US consumer price index and the Baker Hughes oil rig count at 1330 BST and 1800 BST, respectively.

"Inflation – or lack of - has been an ongoing problem for the Federal Reserve and some policy makers have voiced concerns about this in recent months as they consider whether to raise interest rates again this year. Should we see another dip in inflation in July, it could make the job of building a consensus for another rate hike this year more difficult," said Erlam.

However, a healthy US job market has been what the Fed has relied on to maintain its guidance of three rate hikes in 2017. Having lifted rates in June for a second time this year, the central bank highlighted the "strengthening" in the job market despite concerns of a slowdown in US inflation.

The dollar has remained strong against the pound of late, as investors took as dovish the Bank of England's last monetary policy decision on August 3. Sterling had rallied in the run-up to the Monetary Policy Committee meeting - touching an 11-month high at around USD1.32 - but it has fallen back below the USD1.30 line, quoted at USD1.2958 at midday against USD1.2982 at the London equities close on Thursday.

The resilient greenback was a road-block for copper prices, with London-listed mining stocks being the main drag for the FTSE 100. The FTSE 350 Mining sector index was down 3.5%, the worst performing sector index, with Anglo American the biggest loser, down 4.3%.

Nevertheless, the gold price was rallying as a risk-off attitude continued to reign in the market. The precious metal was quoted at USD1,288.11 an ounce at midday compared to USD1,268.44 an ounce at the London close on Thursday.

Elsewhere on the London Stock Exchange, Coca Cola HBC was up 1.7%, the best blue-chip performer. The soft drinks bottler, namely of Coca-Cola products, was extending the gains seen on Thursday - when it rose 9.2% after reporting higher profit and revenue in the first half of 2017, driven by volume growth and margin improvements.

In the FTSE 250, Domino's Pizza Group was down 3.8%. The pizza delivery company said it has created a partnership with its largest franchisee in London in order to take advantage of the "significant growth opportunity" in the capital.

As part of the deal, the pizza delivery company will pay GBP24.0 million to the franchisee for a 75% stake in a newly formed company, which will own the franchisee's 25 existing Domino's stores in London. Domino's said the partnership, which will be finalised in September, will enable the company "to take advantage of the significant growth opportunity in the London area".