Tension escalates once again between the United States and North Korea, which claimed to have tested its most powerful nuclear bomb Saturday night. President Donald Trump, in turn, declared the country “hostile and dangerous to the United States” in a series of tweets.
North Korea said its hydrogen bomb, which is more powerful than the atomic bombs dropped on Hiroshima and Nagasaki in World War II, could be mounted on a ballistic missile that can reach the continental United States.
Before considering the life-and-death ramifications of a preventative war, under which certain South Korean populations would be at risk, diplomatic anxieties will likely have some immediate effects on Wall Street come Tuesday morning.
When Trump threatened “fire and fury” to North Korea last month if it continued its menace, investors wasted no time jumping to havens. Gold, for instance, rose to its highest price in almost two months.
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Government bonds became an instant darling as well, with the 10-year benchmark Treasury note’s interest rate falling 3.6 basis points and the 30-year Treasury with 4.1 basis points down as prices gained, Marketwatch reported Aug. 9.
The Swiss franc and the Japanese yen both increased against the dollar. The yen hit an eight-week high that second week of August, while the South Korean won dropped nearly 1%.
“The Swiss franc is the safe haven of choice today as risk sentiment gets hit from escalating nuclear fears between the U.S. and North Korea,” Kathleen Brooks, research director at City Index Direct, told the Guardian. “Unsurprisingly, the yen, which is still the second-best performer in the G10 foreign exchange space, is playing second fiddle to the Swiss franc due to Japan’s proximity to the epicentre in Pyongyang.”