N.Korea missile and strong euro sink European stocks

World stocks tumbled and safe-haven assets soared on Tuesday after North Korea fired a missile over northern Japan, fuelling worries of fresh tension between Washington and Pyongyang.

The risk-off move spread from Asia to Europe and a rally in the euro to above a key level chipped in to put regional stocks on track for their biggest-one day loss in 11 months.

The pan-European STOXX index fell as much as 1.7 percent to their lowest in six months before paring losses, while Wall Street futures pointed to sharp losses at the open.

Japan`s Nikkei hit a four-month low before paring losses to end 0.5 percent down and South Korea`s Kospi <.ks11 shed="" as="" much="" percent="" before="" ending="" down="" percent.="">

"The North Korean escalation has triggered a significant risk-off move," Alessandro Balsotti, head of asset management at JCI Capital Limited, said in his daily note to clients.

"However ... observers believe it won`t be enough to trigger a material reaction from the United States-South Korea axis. It wouldn`t be surprising, then, if investors take advantage of this geopolitical fear to buy the dips."

The MSCI World Index, which tracks stocks from developed economies, fell around 0.2 but remained above a five-week low hit earlier his month on jitters over North Korea, growing turmoil at the White House and a deadly attack in Spain. North Korea fired a missile on Tuesday that flew over Japan and landed in the Pacific about 1,180 km (735 miles) off the northern region of Hokkaido in a sharp escalation of tensions on the Korean peninsula.

North Korea has conducted dozens of ballistic missile tests under young leader Kim Jong-Un, but firing projectiles over mainland Japan is his first.

The unprecedented move raised worries that the crisis could further mount, sparking a rush into safe haven assets from the Japanese yen to the Swiss franc and the German bund.

"As a tactic to force all sides to the negotiating table it is a dangerous one that could backfire," said Irene Goh, head of multi-asset solutions for Asia Pacific and a member of the diversified multi-asset committee at Aberdeen Asset Management.

North Korea threatened earlier this month to fire missiles into the sea near the U.S. Pacific territory of Guam after U.S. President Donald Trump warned that Pyongyang would face "fire and fury" if it threatened the United States.

"Investors should look to protect themselves," Goh added. "The question is where to find safe shelter given how asset prices have become divorced from fundamental value... We believe the safest spot to be is not one place, but many".

The dollar hit its lowest level since mid-April against the yen and was last down 0.7 percent at 108.49.

The Japanese currency tends to benefit during times of geopolitical or financial stress because Japan is the world`s biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis materialize.

Also the safe-haven Swiss franc strengthened, while gold, up 0.9 percent to $1,321 an ounce, hit its highest level in more than nine months after three straight days of gains.

The metal also drew support from uncertainty surrounding the Trump administration after remarks last week raised fears of a government shutdown.

Investors also rushed to the safety of U.S. Treasuries, briefly pushing down the 10-year yield to its lowest since mid-November, while the yield on Germany`s 10-year government bond fell to 0.33 percent, the lowest since end June.EURO ABOVE $1.20

Though the risk-averse mood prevailed across financial markets, the euro appeared immune to the geopolitical news.

The single currency surged above 1.20 to the dollar, breaching a key level as investors grew bullish about its outlook after European Central Bank President Mario Draghi refrained from talking about the currency`s recent strength and in the backdrop of brewing U.S. fiscal problems.

"The market is still digesting Draghi`s comments from Jackson Hole and the U.S. outlook is looking difficult with concerns around the budget and a looming shutdown," said Esther Maria Reichelt, an FX strategist at Commerzbank in Frankfurt.

In commodities, crude prices dipped as the market grappled with the shutdown of some 13 percent of refining capacity in the U.S. after a hurricane ripped through the heart of the country`s oil industry.

International Brent crude futures fell 0.9 percent at $51.44 per barrel.

U.S. gasoline price, which surged as much as 7 percent to a two-year peak of $1.7799 a gallon on Monday, traded at $1.7001 on Tuesday.Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)

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