Save Haven Assets Rally Following Hydrogen Bomb Detonation by North Korea

European stocks headed south following a decline in Asian bourses as North Korea detonated a hydrogen bomb, that they claim can be attached to an ICBM. Gold prices clocked a new 11-month high at $1, 344.59 after a 1% rally, sparked by the nuclear antics of North Korea. The safe haven metal had already been well bid in the wake of the hurricane in the U.S. and fading odds for Fed tightening by year-end. The dollar lost ground to the Euro as Eurozone confidence continued to improve.

Eurozone PPI Contracted in July

Eurozone July PPI inflation fell back to 2.0% year over year, more than anticipated and with June revised down to 2.4% year over year from 2.5% year over year reported initially. However, preliminary August HICP data already showed a renewed uptick in energy price inflation that will likely be reflected in the PPI number for that month as well and at the same time, PMI readings suggest that the disinflationary phase in cost pressures has come to an end. So, the overall tide of inflation seems to be slowly turning, even if the PPI number came in down in July.

Eurozone Sentix investor survey improves slightly in September – to 28.2, with the Institute seeing the Eurozone in a boom phase. The dip in the German reading for August was corrected partly in September, but the institute said the Sentix survey did not share the same optimism as the respondents of the Ifo survey. That ties in with the dip in ZEW investor confidence, which also suggested diverging views between financial markets and actors in the real economy.

The UK’s August construction PMI disappointed, coming in with a headline reading of 51.1, down from 51.9 in July and the weakest level since August 2016. A sharp decline in commercial construction work drove the headline lower, which more than offset robust growth in residential building. Civil engineering activity was new stagnant. Reduced business investment and associated heightened economic uncertainty were reported by respondents to be crimping demand in the commercial sector. Job creation in the construction sector was its weakest since July 2016, which was the month after the vote to leave the EU, which caused a temporary economic shock. The biggest take away from the survey is that new order volumes fell for a second consecutive month, as this portends sustained weakness in the construction sector.