Indian Equities May See More Outflows After North Korea’s Missile Launch

Asian stocks fell while safe havens rose after North Korea fired a ballistic missile over Japan, ensuring further escalation of tensions with the U.S. The move was especially surprising after the hermit kingdom had been praised by Secretary of State Rex Tillerson last week for its “restraint.”

India's NSE Nifty 50 Index snapped a four-day winning streak, falling as much as 0.5 percent in line with its Asian peers.

"Direction of the market will depend on U.S.' reaction on the same,” said Ajay Bagga, an independent market research analyst, told BloombergQuint. Be that as it may, Bagga does not see any long-lasting impact on the markets.

Vibhav Kapoor, group chief investment officer of IL&FS, agreed, adding that this missile launch will be a “temporarily negative factor”.

Also Read: Gold Jumps on Haven Demand as N. Korea Lobs Missile Across Japan

India's equities have seen a pull back of $2 billion in August over fears surfaced by a slowdown in manufacturing and services sectors and muted corporate earnings. Rising geopolitical concerns like these would further take investors away from equity markets towards safe havens.

"FII (foreign institutional investors) have been pulling out money from Indian markets. There could be a trigger to reduce money in Indian markets," Bagga said.

“However, domestic investors will step-in to stabilise the markets.”

Here's the impact of the North Korea's latest provocation:

Stocks

• The Topix index dropped 0.3 percent at the midday break in Tokyo, while the Kospi lost 1.2 percent and the S&P/ASX 200 Index in Sydney declined 0.9 percent. Hong Kong's Hang Seng Index lost 0.4 percent, while the Shanghai Composite Index rose 0.2 percent.
• Contracts on the S&P 500 Index were down 0.6 percent after falling as much as 0.9 percent. The underlying measure was little changed on Monday.
• Dow Jones Industrial Index contracts retreated 0.4 percent, while those on the Nasdaq 100 were 0.6 percent lower. The MSCI All-Country World Index fell 0.1 percent.

Currencies

• The yen advanced 0.4 percent to 108.81 per dollar.
• The won slid 0.5 percent to 1,125.43 per dollar.
• The euro fell 0.1 percent to $1.1970, while the franc gained 0.3 percent.
• The Aussie dollar dropped 0.5 percent.
• The Bloomberg Dollar Spot Index was little changed.

Bonds

• Ten-year Treasury yields fell three basis points to 2.13 percent.
• The yield on Australian notes of similar maturity fell almost four basis points to 2.62 percent.

Commodities

• West Texas Intermediate crude rose 0.6 percent to $46.83 a barrel, retracing some of its 2.7 percent slide on Monday.
• Gasoline for September delivery climbed 1.6 percent to $1.7389 a gallon, after climbing 2.7 percent on Monday. Harvey shut more than 10 percent of U.S. fuel-making capacity.
• Gold advanced 0.7 percent to $1,317.02 an ounce, extending a 1.3 percent advance on Monday.