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EUROPE MARKETS: European Stocks Slide After U.S. And North Korea Cross Swords

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08/09/2017 | 07:01pm CEST

By Carla Mozee, MarketWatch

Novo Nordisk shares fly higher on raised outlook

Stocks across Europe closed sharply lower Wednesday as tensions between the U.S. and North Korea escalated.

In Frankfurt, the DAX 30 dropped 1.1% to 12,154.00, and in Paris, the CAC 40 index was fell 1.4% to 5,145.70. Those marked the worst sessions for those benchmarks since July 21, FactSet data showed.

Those moves left the Stoxx Europe 600 down by 0.7% to 379.84, with only the utilities sector, considered defensive, notching a small gain at the close.

Bank shares were hit hard Wednesday and that pulled the Stoxx Europe 600 Bank Index down 1.4%, the biggest decline in three weeks and the first loss in five sessions.

Regional stocks remained lower throughout the session after North Korean leader Kim Jong Un made an explicit threat to strike a U.S. military base in Guam .

His order, reported in state media, came hours after U.S. President Donald Trump late Tuesday warned Pyongyang not to "make any more threats" to the U.S, saying it would face a "fire and fury" response "like the world has never seen." Trump's comments came after a Washington Post report (https://www.washingtonpost.com/world/national-security/north-korea-now-making-missile-ready-nuclear-weapons-us-analysts-say/2017/08/08/e14b882a-7b6b-11e7-9d08-b79f191668ed_story.html?utm_term=.0938becb046e) that North Korea has built a miniaturized nuclear warhead.

Korea's Kospi stock benchmark lost 1.1% as geopolitical concerns grew, clipping its year-to-date gain to 16.9%. U.S. stocks also retreated , although Walt Disney Inc. shares (>> Walt Disney Company (The)) were also a major source of pressure on the Dow Jones Industrial Average .

"If tensions between the U.S. and North Korea escalate further, we think that the implications for equities in South Korea and elsewhere will remain limited provided that war does not actually break out," wrote Oliver Jones, assistant economist at Capital Economics.

"This was the case for U.S. equities during the 1962 Cuban missile crisis, when the world arguably came closest to outright conflict between two nuclear-armed powers," Jones said.

Back on the Stoxx 600, shares of gold miners Fresnillo PLC (>> Fresnillo) and Polymetal International PLC (>> Polymetal International) leapt 4.9% and 3.3%. Those shares tracked a climb of more than 1% in gold prices , to nearly $1,280 an ounce.

A more than 1% climb in the Swiss franc against the dollar during the session pressured Swiss stocks. The SMI dropped 135.18 points, or 1.5%, to 9,027.15. That was the largest point loss for the Swiss equity benchmark since June 29.

The euro fetched $1.1748, not far off from $1.1752 late Wednesday in New York.

In other developments Wednesday, shares of Novo Nordisk A/S rallied 7.9%. Their best session since March 2015 came as the Danish drugmaker raised its growth targets for the year on expectations of robust sales of its type-2 diabetes drug Victoza and long-acting insulin Tresiba.

In London, the FTSE 100 fell 0.6% to 7,498.06 , and Spain's IBEX 35 slumped 1.3% to 10,596.00.

Stocks mentioned in the article : Walt Disney Company (The), Polymetal International, Fresnillo
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