US equities and Down Jones fell after the North Korean hydrogen bomb test. Down Jones dropped particularly after the Labor Day break. The Labor Day holiday meant that the US stock market opened Tuesday, rather than Monday. The North Korea nuclear test made many investors nervous and the Dow Jones Index fell by 70 points at opening.
Not surprisingly, the biggest drop was by a defense company: the aerospace and defense firm United Technologies. It had just announced a deal to purchase Rockwell Collins, the avionics, defense and IT systems company. United Technologies stock dropped after the $30 billion deal was announced. Standard and Poor’s 500 dropped by 0.24% with a 0.2% drop of NASDAQ Composite. Stoxx 600, which tracks European equities dropped 0.52%, while the Nikkei 225 dropped by 0.9%
Why should a successful hydrogen bomb test affect these financial metrics? It’s largely due to uncertainty over what is going to happen next. In times of political and commercial uncertainty, investors tend to seek safe havens for their cash. Along with gold and other metals, the Japanese yen has always been a safe place for investment. Because of this, the yen and gold futures rose by around 0.5% and 0.4% respectively.
Several market issues are affecting stock prices and futures. On is US unemployment. An improving unemployment rate has reduced some of the fallout from the North Korean missile and nuclear bomb tests. However, the US economy is not yet on a stable footing due to uncertainty about President Trump’s policies.
What is the Fed’s lookout on interest rates – and how about the debt ceiling? A government shutdown is not an impossibility. As with everything, time will tell. For now, US equities and Dow Jones seem to have stabilized, but the effect of the North Korea bomb test will reverberate for some time to come. Now is not the time for a knee-jerk reaction: financial or otherwise.
Pvt. Ltd.
