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Home>LONDON MARKETS: FTSE 100 Heads Lower As North Korea Tensions Persist

LONDON MARKETS: FTSE 100 Heads Lower As North Korea Tensions Persist

LONDON MARKETS: FTSE 100 Heads Lower As North Korea Tensions Persist

09/26/2017

By Sara Sjolin, MarketWatch

Pound rises to highest euro level since July

U.K. stocks dropped for a second straight session on Tuesday, as the escalation in the war of words between the U.S. and North Korea fueled fears of a nuclear war and drove investors out of risky assets.

The FTSE 100 index fell 0.3% to 7,280.68, building on a 0.1% loss from Monday (http://www.marketwatch.com/story/ftse-100-under-pressure-as-european-political-uncertainty-lifts-the-pound-2017-09-25).

Late in Monday's session, North Korea's foreign minister claimed the U.S. has declared war on the isolated state (http://www.marketwatch.com/story/north-korean-official-says-us-has-declared-war-2017-09-25-13103598), leaving Pyongyang with "every right to make countermeasures." That includes the right to shoot down U.S. strategic bombers, the foreign minister said.

The claim "may seem ludicrous, however, the claim that they reserved the right to shoot down U.S. bombers in international airspace should be taken seriously as the North Koreans do have form in this area for provocation," said Michael Hewson, chief markets analyst at CMC Markets UK, in a note.

U.K. stocks on Tuesday were also squeezed by a rise in the pound, which rallied to the highest level against the euro since July. Sterling bought EUR1.1411, up from EUR1.1367 late Monday in New York. Against the dollar, the pound traded at $1.3477, up from $1.3469 on Monday.

As most revenue for FTSE 100 companies is made overseas, a higher pound can squeeze earnings when converted back into the U.K. currency.

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