Markets in risk off mode as tensions with North Korea escalate

Markets are in risk-off mode this morning following escalating tensions between the US and North Korea overnight.  Gold and JPY have been the main beneficiaries although the USD has also strengthened against other majors.  The main data release yesterday was the JOLTS survey of job openings in the US, which showed a rise to 4% in June and indicated that firms are finding it harder to find the right employees.  This suggests that wages are likely to rise at a faster rate going forward.  Firms have also indicated that they are likely to increase capital investment in order to boost employee productivity.  Separately, the NFIB small business optimism index rose to a better than forecast 105.2 in July, on the back of greater sales expectations and an improving business climate in the US. 

Data from China released this morning shows both consumer and producer inflation stable in July at 1.4% y/y and 5.5% y/y respectively.  Both readings were slightly lower than forecast.  US inflation data is due to be released on Friday.

ZAR gave back all its gains yesterday after President Zuma survived a vote of no-confidence that was held by secret ballot.  The ruling ANC will elect a new party leader in December, and Zuma’s term as president will end in 2019.    

The Emirates NBD Dubai Economy Tracker Index was broadly unchanged in July at 56.3, still signalling robust expansion in the non-oil private sector.  Output and new orders rose sharply last month on the back of further price discounting and promotional activity, although employment growth remained relatively soft. Firms surveyed attributed the rise in business activity to “favourable economic conditions and more projects”.  

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