News flow on the tension between the US and North Korea seems to over weight every economy data announced / will be announced.
It looks like markets didn't believe to political stress will come to this point. None of the sides will ease in the following days.
From the statement of Chief Investment Officer at Cornerstone Wealth Management Alan Skrainka,
If the market truly believed the North Korea reaction was imminent, I think it would be down a lot more than it is...
And the statement of Shane Oliver, head of the investment strategy AMP Capital in Sydney,
What has changed this time is that the scary threats and war of words between the U.S. and North Korea have intensified to the point that markets can't ignore it...
Markets seem to undervalue this tension. So, this increases the probability of the selling pressure when an unexpected increase in the stress happens.
On the other hand, markets were at their peaks. Therefore, this event could trigger a downside trend, which has a probability to start "a chain reaction" in the red area.
The fear index, which is known as VIX, climbed up about more than 40% parallel to other global fear indexes. Demand to the safe harbours increased such as 10-year US government and Japanese bonds alongside the dollar, Japanese yen and Swiss franc.
Gold and silver joined the club. Silver expanded its gains more than gold, which decreased the XAU/XAG ratio on the fourth day in a row. Due to the increased pressure, the US and Asian markets were in "risk-off" mode. MSCI Asia excluded Japan is down about 2.54%.
Apart from political tension, another Fed rate hike looses its probability for this year. However, the FED's shrinking in its balance sheet might happen in September as the labour force data show.
Parallel to the iShares MSCI Turkey (NYSE:TUR) ETF, a negative opening, which has a substantial chance to continue the selling during the day, should be expected in BIST 100.
Today, the inflation data of the US will be watched by the global markets, which they will look for the hints for the "rate hike" and balance-sheet reduction.