European markets have crashed into the red after North Korea ratcheted up tensions with the United States by firing a ballistic missile over Japan.
The FTSE 100 Index was down 101.47 points to 7,300.19, after the rocket plunged into waters off the northern Pacific Ocean in sign of defiance from Pyongyang to the war games being conducted by Washington and South Korea.
Germany’s Xetra Dax dropped 1.7% and the Cac 40 in France fell 1.6% as analysts speculated whether North Korea was testing a new intermediate-range missile that it threatened to fire towards the US territory of Guam.
David Madden, analyst of CMC Markets UK, said: “Tensions have been running high for a number of weeks now in relation to North Korea, and this move has sent traders running for cover.
“The situation surrounding North Korea has become more serious now, and we are seeing a risk-off strategy being adopted by traders.
“There was a knee-jerk reaction to the missile being launched, but after a while traders’ nerves settled, and we saw a bounce back in equity markets – which are off the lows of the session.”
On the currency markets, the pound was experiencing a mixed session, slipping 0.4% against the euro to 1.074, but rising 0.2% versus the US dollar to 1.296.
The greenback was down against a host of major currencies, helping the euro reach the psychologically important 1.20 US dollar mark.
The fall was driven by anxiety over North Korea coupled with concerns about a potential hit to the US economy from tropical storm Harvey
The oil price also responded to the severe weather hammering Houston, Texas, as production was hampered by a number of refineries going offline. Brent crude was up 0.3%
to 52.02 US dollars a barrel.
In UK stocks, the lion’s share of blue-chip firms were in the red, except for precious metal miners that were enjoying a boost as investors sought out safe havens.
Silver miner Fresnillo rose 3%, or 53p to 1,633p, while Randgold Resources climbed 4%, or 305p to 7,875p.
Outsourcing firm Bunzl was also down despite profits rising sharply in the first half of the year as it reaps the rewards of growth in the US.
Shares were off 17p to 2,314p as the group posted a 20% rise in revenue to £4.1 billion and pre-tax profit increased 17% to £181.9 million in the six months to June 30.
Bunzl has been buoyed by a string of acquisitions in North America, where it books the vast majority of its revenue, and the Brexit-induced collapse in sterling.
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