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Europe stocks follow Asian equities higher after Korea tensions ease

London - European stocks followed most Asian equities higher as tensions surrounding North Korea eased. The yen dropped as demand for safe-haven assets began to fade, although gold and the Swiss franc held most of Tuesday’s gains.

Almost every sector of the Stoxx Europe 600 Index advanced after President Donald Trump’s measured response to North Korea’s missile launch and comments from Kim Jong Un suggested the situation won’t escalate.

Equity indices in Japan, Hong Kong and South Korea rose, while US stock futures were also green. Most bonds fell as the risk-off mood ebbed. The euro weakened and the dollar gained as Goldman Sachs Asset Management called the greenback “ very, very attractive.”

Kim said on Wednesday the missile was fired in protest at annual military exercises between the US and South Korea. Coupled with Trump’s tempered remarks - the president said the US will consider “all options” in its response to the provocation - investors judged the standoff is unlikely to intensify, helping to underpin risk assets.

“We’ve seen the typical reaction that you would expect yesterday, with the safe-haven assets like the yen gaining and the Korean won obviously weakening and equity markets in this region selling off,” Khoon Goh, Australia & New Zealand Banking’s head of Asia research, said in a Bloomberg Television interview.

“What’s interesting is that the reaction has been fairly muted and a lot of the moves have largely reversed and I think it’s a case now where what’s happening with North Korea is not necessarily new.”

Among other key events looming this week:

• Inflation in Germany may have ticked up in August - but Mario Draghi won’t get too excited when the data is released today.

• Currency traders will be looking for a statement of independence from South African Reserve Bank Governor Lesetja Kganyago today when he speaks on the central bank’s role.

• The US updates second-quarter GDP and core price data on Wednesday, while the ADP Research Institute’s monthly report on hiring trends is the same day.

• The August payrolls report is on Friday.

And here are the main moves in markets:

Stocks

• The Stoxx Europe 600 Index rose 0.5% as of 10:46, the largest advance in more than a week on a closing basis.

• The UK’s FTSE 100 Index rose 0.3%, the biggest advance in more than a week.

• Germany’s DAX Index rose 0.6%, the largest advance in more than a week.

• Futures on the S&P 500 Index rose 0.1%.

Currencies

• The Bloomberg Dollar Spot Index increased 0.1%.

• The euro declined 0.2% to $1.1951, the biggest fall in more than a week.

• The British pound decreased less than 0.05% to $1.2913.

Bonds

• The yield on 10-year Treasuries climbed less than one basis point to 2.13%.

• Germany’s 10-year yield increased one basis point to 0.36%.

• Britain’s 10-year yield gained two basis points to 1.021%, the largest advance in more than a week.

Commodities

• West Texas Intermediate crude dipped 0.6% to $46.14 a barrel, the lowest in almost six weeks.

• Gold rose less than 0.05% to $1 309.75 an ounce.

• Gasoline for September delivery rose 3% to $1.8371 a gallon.

Asia

• The Topix index rose 0.6% at the close in Tokyo and the Kospi index added 0.3%.

• Australia’s S&P/ASX 200 Index was flat.

• The Hang Seng Index in Hong Kong climbed 1.2%, while the Shanghai Composite Index fluctuated.

• The MSCI Asia Pacific Index rose 0.2%.

• The Japanese yen fell 0.2% to ¥109.96/$.

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