North Korea Leader Death Spooks Market: Stock in Asia Tumble

U.S. Dollar Trading (USD) stocks in Asia tumbled on news that the North Korea leader had died as this has created a leadership vacuum that could destabilize the region. December NAHB Housing Market index rose to 21 vs. 19 previously. Stocks closed on a weak note reversing early gains in the US on concerns the US payroll tax cuts will not be extended.  In US stocks, DJIA -100 points closing at 11766, S&P -14 points closing at 1205 and NASDAQ -32 points closing at 2523. Looking ahead, November Housing starts forecast at 0.635mln vs. 0.628mln previously.

The Euro (EUR) the Euro was extremely contained with a dip below 1.3000 in Asia on the North Korea news reversed in Europe. A daily range on only 60 pips us extremely tight given the debt crisis and highlights the holiday period we have entered. The outlook is mixed with the consolidation potentially leading to a topside 1.3080 test. A lot the negative news is priced in and unless a shock comes to the market like a downgrade of France then any good news could spark a short covering rally. Looking ahead, ECB President Speaks. December German IFO forecast at 106 vs. 106.6 previously.

The Japanese Yen (JPY) the USD/JPY broke above Y78 as the North Korea news broke with Japan a close neighbor and potential target in any threat by a new North Korean leader flexing his countries military might. The market was unable to hold the gains however falling back as risk aversion hit the crosses dragging the EUR/JPY and AUD/JPY lower. The market is still grinding higher however and could break to the topside as longer term shorts lose patience.

The Sterling (GBP) like the Euro the GBP/USD was very contained with risk aversion in Asia reversed in Europe. EUR/GPB is pivoting the 0.8400 waiting for the next headline out of the Eurozone. December House Prices dropped -2.7% m/m. Looking ahead, December Distributive Trades forecast at -13 vs. -19 previously.

The Australian Dollar (AUD) the Aussie was the worst hit currency from the risk aversion in the markets yesterday closing below 0.9900. The RBA minutes released in early Asia did offer some reprieve however and most analysts are calling for range trading over the holiday period in thin markets. AUD/JPY is finding solid support at Y77 and is a closely watch cross for the major.