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Risk aversion was the name of the game during the Asian session, as traders priced in their worries over escalating tensions between North Korea and the U.S.

  • U.K. BRC shop price index (y/y) slips by 0.3% vs. 0.4% decline in May
  • AU AIG services index shoots up from 51.5 to 54.8 in June
  • NZ ANZ commodity prices up by 2.1% vs. 3.2% uptick in May
  • NZ ANZ job ads up by 1.3% in June vs. 0.6% gain in May
  • China’s Caixin services PMI dips from 52.8 to 51.6 in June
  • U.S. Secretary of State Rex Tillerson calls for “global action” to top North Korea’s nuclear threat

Major Events/Reports:

China’s Caixin services PMI

Unofficial (but closely-watched) data from the world’s second largest economy saw the services sector grow just a little bit softer in June.

Caixin’s services PMI, which focuses on small and medium-sized firms, printed a reading of 51.6 in June, which is still in expansionary territory but is softer than May’s 52.8 index figure and represents the second weakest reading in 13 months.

Services companies noted the slowest uptick in new orders in a year, with many concerned about “subdued market conditions” weighing on client demand.

At the composite level, new work had increased at the slowest pace in nine months. The composite index came in at 51.1 in June after clocking in at 51.5 in May.

Overall, the reports still denoted growth, but presented concerns not seen in the official figures.

North Korea’s threats kept a lid on risk appetite

The biggest story of the hour is market players getting spooked by escalating tensions between North Korea and the U.S.

As mentioned in my U.S. session recap, the hermit kingdom just test-launched an intercontinental ballistic missile (ICBM) that analysts believe could reach Alaska.

North Korea’s state television said that the test of Hwasong-14 reached an altitude of 1,731 miles and flew for 39 minutes before hitting a target in the sea.

U.S. Secretary of State Rex Tillerson added to the tension in early Asian session when said that “global action is required to stop a global threat.

Pentagon spokeswoman Dana White promptly backed up her bro, saying that “We remain prepared to defend ourselves and our allies and to use the full range of capabilities at our disposal against the growing threat from North Korea.

Naturally, the escalating tension spooked Asian session traders and weighed on high-yielding assets.

  • Australia’s A SX 200 is down by -0.48% to 5,756.20
  • Nikkei is down by 0.07% to 20.018.50
  • Hang Seng is up by 0.30% to 24,465.00
  • Shanghai index is up by 0.24% to 3,190.34

Major Market Mover(s):

USD

The Greenback lost supporters as the U.S. toughened its stance against North Korea’s missile tests.

EUR/USD shot up to a session high of 1.1369 before leveling off to 1.1359, GBP/USD also hit 1.2948 before dropping back down to 1.2933, and AUD/USD shot up by 14 pips (+0.18%) to 0.7619.

JPY

The yen gained back some of its losses as risk-averse traders flocked to lower-yielding assets.

CAD/JPY is down by 22 pips (-0.25%) to 87.38, EUR/JPY is down by 11 pips (-0.09%) to 128.41, and GBP/JPY is down by 16 pips (-0.11%) to 146.21.

Watch Out For:

  • 7:15 am GMT: Spanish services PMI (56.6 expected, 57.3 previous)
  • 7:45 am GMT: Italian services PMI (54.6 expected, 55.1 previous)
  • 7:50 am GMT: French final services PMI expected to remain at 55.3
  • 7:55 am GMT: German final services PMI expected to remain at 53.7
  • 8:00 am GMT: Euro Zone final services PMI expected to remain at 54.7
  • 8:30 am GMT: U.K. services PMI (53.6 expected, 53.8 previous)
  • 9:00 am GMT: Euro Zone retail sales (0.4% expected, 0.1% previous)