LONDON MARKETS: U.K. Stocks Knocked Sharply Lower After North Korea Launches Missile Over Japan
30 August 2017 - 12:13AM
Dow Jones News
By Carla Mozee, MarketWatch
Insurers fall as analysts begin calculating the costs of Storm
Harvey
U.K. stocks dropped sharply Tuesday, as part of a selloff in
global equity markets after North Korea launched a ballistic
missile over Japan.
The FTSE 100 index fell 1% to 7,326.43. No sector moved higher.
Trading in the U.K. was closed Monday for the August Bank
Holiday.
Roughly 12 components on the London benchmark were higher in
afternoon trade, and those advancers were led by miners Randgold
Resources Ltd. (RRS.LN) (RRS.LN) and Fresnillo PLC (FRES.LN) as
gold shot above $1,300 an ounce to around an 11-month high
(http://www.marketwatch.com/story/gold-hits-11-month-high-as-another-north-korea-missile-sparks-haven-flight-2017-08-29).
Randgold jumped 5.2% and Fresnillo climbed 3.4%.
The moves came after Pyongyang launched a missile
(http://www.marketwatch.com/story/north-koreas-outrageous-missile-launch-over-japan-inflames-tensions-again-2017-08-29)
early Tuesday local time that passed over the northern Japanese
island of Hokkaido and landed in the Pacific Ocean. It was the
first missile fired over the main lands of Japan since 2009.
"This has understandably seen an overnight preference for safe
havens such as gold, the Swiss franc, Japanese yen and bonds, at
the expense of equities," said Accendo Markets head of research
Mike van Dulken, adding that the missile launch undermines attempts
by the U.S. to negotiate with North Korea's leader Kim Jong Un.
"Beware the impact of additional [U.S. dollar] weakness (2.5
year lows), which could weigh on both the U.K. FTSE and German DAX
by way of a stronger [pound] and [euro]," he said.
The pound bought $1.2951, compared with $1.2933 late Monday in
New York. A stronger pound can hurt shares of multinational
companies as they make the bulk of their sales and earnings
overseas. Shares of drug maker GlaxoSmithKline PLC (GSK.LN)
(GSK.LN) fell 1.6% and British American Tobacco PLC
(BATS.LN)(BATS.LN) gave up 1.6%.
The euro rose above $1.20 for the first time since January 2015.
The Stoxx Europe 600 during the session slid more than 1% to a
six-month low.
But the sterling trade-weighted index on Tuesday fell 0.4% to
74.50, revisiting levels last seen in November. That's a
"reflection of both euro strength & pound softness," said
Howard Archer, chief economic adviser to EY ITEM Club, in a Twitter
post Tuesday.
Insurers: Shares of insurers dropped as analysts gauged the
potential toll on the industry from Hurricane Harvey, which hit the
U.S. Gulf Coast in recent days. On the midcap FTSE 250, Hiscox Ltd.
(HSX.LN) slumped 2.5%, Lancashire Holdings Ltd. (LRE.LN) lost 3%
and Beazley PLC (BEZ.LN) fell 2.7%. The companies are Lloyd's of
London insurers.
Insured losses, based on precedent, could come in between $4
billion and $12 billion, excluding personal home flood claims that
will be absorbed by the U.S. government's National Flood Insurance
Program, Peel Hunt analyst Andreas van Embden wrote in a Tuesday
research note.
"The main uncertainty is around commercial property and business
interruption claims, particularly now the Houston metropolitan area
is being affected by floods," said van Embden.
Harvey made landfall on Friday as a Category 4 hurricane. The
now-tropical storm is expected to return to the Houston area late
Tuesday or Wednesday.
Harvey "is unlikely to be a market-turning event but enough to
start to eat into the [catastrophe] budgets and expose the
vulnerable underlying returns the Lloyd's insurers are generating
in the current soft market, with risk adjusted returns between
10%-11%," van Embden added.
Read:Congress has less than 5 weeks to reauthorize the National
Flood Insurance Program
(http://www.marketwatch.com/story/harvey-is-a-reminder-congress-has-less-than-5-weeks-to-reauthorize-the-national-flood-insurance-program-2017-08-28)
Also:Harvey set to pummel flooded Houston once again
(http://www.marketwatch.com/story/harvey-set-to-pummel-flooded-houston-once-again-2017-08-29)
Economic data: U.K. house prices fell 0.1% on the month in
August
(http://www.marketwatch.com/story/uk-home-prices-reverse-monthly-rise-nationwide-2017-08-29),
following a modest increase the previous month, according to
Nationwide figures released Tuesday.
Shares of home builders Persimmon PLC (PSN.LN) and Taylor Wimpey
PLC (TW.LN) each fell 0.7%, and Barratt Developments PLC (BDEV.LN)
slipped 0.3%.
(END) Dow Jones Newswires
August 29, 2017 09:58 ET (13:58 GMT)
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