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ECB disappointment and North Korea concerns weigh on markets

Disappointment over the European Central Bank’s decision to keep monetary policy unchanged weighed on the region’s stock markets once again. News that North Korea had conducted a nuclear test also rattled investors, particularly in South Korea.

KEEPING SCORE: In Europe, France’s CAC 40 fell 0.4 percent to 4,517 while Germany’s DAX slipped 0.5 percent to 10,625. Britain’s FTSE 100 was 0.4 percent lower at 6,832. U.S. shares were set to drop at the open too, with Dow futures and the broader S&P 500 futures down 0.4 percent.

EUROPE FACTOR: A key reason for the negative tone in stock markets was Thursday’s decision by the European Central Bank to not extend the duration of its stimulus program. ECB President Mario Draghi also seemed less inclined to expand on the existing stimulus measures anytime soon.

NORTH KOREA ANGST: Also weighing on sentiment was the news that North Korea had conducted a “higher level” nuclear test explosion on Friday that will allow it to finally build “at will” an array of stronger, smaller and lighter nuclear weapons. It was the North’s fifth atomic test and the second in eight months. South Korea’s president called the detonation, which Seoul estimated was the North’s biggest-ever in explosive yield, an act of “fanatic recklessness.” Japan called North Korea an “outlaw nation.”

ASIA’S DAY: Concerns over the test hit shares in South Korea. The Kospi index in Seoul fell 1.3 percent to 2,037.87. Elsewhere in Asia, the impact was less marked. Japan’s benchmark Nikkei 225 rebounded from an initial drop to finish little changed at 16,965.76 while Hong Kong’s Hang Seng rose 0.8 percent to 24,099.70. The Shanghai Composite slipped 0.6 percent to 3,078.85 while Australia’s S&P/ASX 200 dropped 0.9 percent to 5,339.20.

ANALYST TAKE: “European markets are continuing where they left off, with the downbeat sentiment driven by ECB inaction dampening expectations of further easing in forthcoming meetings,” said Joshua Mahony, market analyst at IG. “With Asia still reeling from the safety implications of North Korea’s latest foray into nuclear weaponry, we are seeing the tone set by a largely gloomy Asian session.”

ENERGY: Oil prices lost some of their overnight surge, which followed a report indicating fuel stockpiles fell precipitously last week. Benchmark U.S. crude shed 60 cents to $47.02 a barrel in New York while Brent crude, used to price international oils, lost 82 cents to $49.17 in London.

CURRENCIES: The euro remained solid in the wake of the ECB’s inaction and was trading 0.1 percent higher at $1.1267. Meanwhile, the dollar rose 0.2 percent to 102.73 yen.

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