North Korea’s biggest ever nuclear test has sent a fresh wave of nervousness through global markets.
The South Korean currency, the won, took a hit too, losing nearly 1% against the dollar.
But the losses were muted. Traders noted that the impact of other recent North Korea scares was short-lived, as investors switched their focus back to very low interest rates and the more attractive returns stocks offer.
“The trend in recent months has been for knee jerk risk-averse reactions to geopolitical events to be followed by a gradual recovery … as global monetary accommodation has its usual pacifying effect in markets,” noted Kit Juckes at Societe Generale. “A repeat of that pattern seems eminently possible this week.”
With the U.N. Security Council meeting later Monday, “the key now is how the international community will respond, given how ineffective the tightened U.N. sanctions have been at discouraging North Korea’s ambitions,” said Stephen Innes, head of Asia trading at online broker Oanda.
Some analysts say it will take a lot more than further missile and nuclear tests by Pyongyang to really put a dent in the South Korean stock market. The Kospi index has outperformed the S&P 500 and the Dow so far this year despite a series of unsettling developments concerning North Korea.
U.S. markets are closed Monday for the Labor Day holiday.