Daily Market Color

North Korea Tensions Prompt Flight to Safety While Harvey Continues to Impact Oil

Global financial markets experienced a flight to safety at the opening of the trading session in response to escalating geopolitical tensions resulting from North Korea’s missile launch over Japan.  The Prime Minister of Japan, Shinzo Abe, labeled the action an “unprecedented, grave and serious threat,” while U.S. President Donald Trump affirmed that “the world has received North Korea’s latest message loud and clear: this regime has signaled its contempt for its neighbors, for all members of the United Nations, and for minimum standards of acceptable international behavior.”  Trump later went on state that “all options are on the table” in consideration of the response to North Korea’s actions.   
US Treasury rates/swap yields gapped lower at the open, down 5-7 bps across the curve as the 10-year note yield touched its lowest level since November 2016.  Treasurys retraced a portion of their rally throughout the day, and yields/swap rates are currently 1-4 bps lower across the curve.  All three major US stock indices finished the session higher, with gains ranging from 0.1%-0.3%, after initially opening the session lower amid investor caution.  The US dollar similarly plummeted at the open, falling to a two-year low against major currencies before recovering to finish 0.2% higher on the day.



The impact from Tropical Storm Harvey continues to be felt in energy markets.  With the storm expected to regain strength and head back over land in East Texas tomorrow, the expected damage and refinery shutdowns continue to build.  Gasoline prices increased an additional 4% on the day to a two-year high, while WTI crude oil fell 0.5% to its lowest level in over a month at $46.30/barrel.    


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