Panic retreats, nobody believes in war
The situation in North Korea is still tense. On Monday, Nikki Heylay, the US permanent representative to the United Nations, said that “North Korea is asking for war,” and the half measures taken by the UN over the past twenty years have not yielded any results. At the same time, as a “full-fledged” measure, she demanded new severe sanctions against Pyongyang. We will not go into politics, however, no matter what the true motives of North Korea, which encourage it to demonstrate strength, no one wants a real war. Especially with the use of nuclear weapons. This means that the parties will shake the air with aggressive statements and play with muscles, carefully avoiding a real conflict. And this is what the market believes, which sells risky assets on every new sign of escalation, and immediately buys them on recessions.
Today, some nervousness in the market is still preserved. At least, gold is more expensive, but without yesterday’s enthusiasm, and stock indices are still under pressure. In particular, Japanese stocks are getting cheaper: Topix has lost 0.2% since morning, including due to the strengthening of the yen, which has risen by almost 0.5% against the dollar since the beginning of the week. South Korean Kospi Composite fell by only 0.1% – a good result, given the dangerous neighborhood. Perhaps investors reassured Trump’s promise to double the supply of weapons, although these measures also fit perfectly into the theory of intimidation of each other. Hang Seng grew by 0.1%, despite the decline in the financial companies segment. The Australian S & P / ASX 200 was in outsiders with losses of 0.4%.
With Bitcoin, something happens
It seems that the Crypto-currency has formed the next top and matured for correction, which this time may be somewhat deeper than usual, as China on Monday imposed a ban on the ICO, recognizing this method of attracting financing as illegal and dangerous. Bitcoin started to fall on Friday and for the last three sessions sank almost 9%. However, most of the others went to the etherium, as the basic currency of the ICO: since the beginning of the week, the air has fallen by more than 20%, while the downward dynamics is rapidly gaining momentum. Given the volatile nature of digital currencies and the excessively sharp growth for a long time, crypto currencies may fall in price by another 20 percent (and the etherium even more) without affecting the long-term uptrend. In general, the bubble has not burst yet, but the risk that the correction will turn into a panic flight is still present.
The yen and the franc are still growing, but the momentum is not the same
The yen has grown again, not only against the dollar. The status of the refuge currency, as well as a decrease in yield on 10-year state. US bonds at 2.6% feed the upward dynamics of the Japanese currency, but still within the former ranges. The dollar / yen in the morning went down to the level of 109.30 and, moreover, it may well look beyond the magical level of 109.00, but only then to immediately return. The main reason for the growth of the Japanese currency remains the situation in North Korea, but the panic on this issue is beginning to weaken, depriving investors of motivation to buy the Japanese currency.
Dollar / franc approached local support in the area of 0.9550. From a technical point of view, a confident breakthrough will speed up the sale below, however in the long run the main support in the pair is at the level of 0.9450. As in the case of the yen, one escape from risks is not enough for this, and the fundamental factors are not able to arouse investors’ interest in the low-yield franc. Recall that the discount rate of the National Bank of Switzerland is bogged down in a deep minus (-0.75%) without any hope of an increase in the foreseeable future. In the end, panic and risk aversion will pass, and low return on assets will remain, limiting the franc’s upside potential.