Shares rally, yen and gold fall as Korea tensions ease

Gold Slides As North Korea Relents

The dollar rose broadly on Monday as traders unwound bearish bets against the US currency that have come in the wake of increasing tensions with North Korea and underwhelming inflation data.

European shares bounced after falling almost 3% last week, with the pan-European STOXX 600 up 0.7% following on from a 0.9% jump in MSCI's index of Asia-Pacific shares outside Japan. Energy stocks fell 1.3 percent as oil prices declined.

"Once you have a good lift in the market like yesterday, it's going to take a little more confidence that it can be sustained, especially at the valuations we're at. With the report that North Korea has put its plans on hold, there is a sense of stepping back from the brink", Rabobank analyst Lyn Graham-Taylor said.

Global equities continued to rebound from their late-week slide Tuesday as tensions eased between the USA and North Korea.

The CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the USA presidential election on Thursday, but was down 1.22 points at 14.82 points on Friday.

Hong Kong was back in positive territory Monday after slumping two percent Friday, while Shanghai ended the day higher despite data showing Chinese industrial production slowed sharply in July as government efforts to rein in debt weighed on demand.

Assets that generally do well in time of market or geopolitical turbulence were among fallers on Tuesday.

The dollar rose by more than 1 percent against the Japanese yen JPY=, touching its highest in more than a week and on pace for its largest daily rise against the yen since July 3.

The dollar index .DXY rose 0.47 percent, with the euro down 0.42 percent to $1.1729.

Also weighing on the metal was the prospect of another raise in U.S. interest rates by the Federal Reserve this year, with one influential member, New York Fed President William Dudley backing the same.

Sterling hit a five-week low of $1.2867, falling below $1.29 for the first time since July 13, after United Kingdom inflation undershot expectations, making a rise in Bank of England interest rates less likely.

Elsewhere, the dollar rose from last week's four-month lows against the yen and traded up against a currency basket, making dollar-priced gold costlier for non-U.S. investors.

The Toronto Stock Exchange's S&P/TSX composite index mirrored global market, advancing advanced 86.53 points, or 0.58 per cent, to 15,119.91. According to Rakuten Securities, Japanese companies now expect a 10.5 percent rise in their net profits for this fiscal year through March, compared to a 5.9 percent increase forecast in May.

Platinum fell 0.1 percent to $978.95 per ounce and palladium was down 0.1 percent at $891.65 per ounce.

However, Tokyo closed one percent down as traders returned from a three-day holiday weekend to play catch-up after Asian and European shares had dropped Friday, with the Nikkei finishing at its lowest level in more than three months.

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