Following North Korea’s claim that it has turned into a nuclear state sending most European stocks low on Tuesday, German stocks dragged the DAX 30 index down by as much as 0.36% on Tuesday as most EU investors were left trading alone as stocks on the Wall Street and New York Stock Exchange closed for the day in celebration of the Independence Day.
This comes after the statement from North Korea on Tuesday that it has been able to test launch an intercontinental ballistic missile successfully. According to experts, the trajectory flown by the test missile could potentially hit U.S. state Alaska. North Korean leader Kim Jong Un reportedly ordered the missile launch personally and stated that the country is now a proud nuclear state which can target anywhere in the world.
The Euro Stoxx 50 slumped 0.39% down carrying down other European indexes with it. The CAC 40 index from France also traded down by 0.45% from closing at 0,7% at 5,120.68 last week and recording a 3.1% decline for the month of June.
On the other hand, the DAX 30 index which ended lower as early as last week’s session by 3.2% for the week mostly due to the rally in euro.
The German index decline was also due to the slump in Bayer shares continued to decline in reaction to European equities closing lower on Tuesday. Shares of pharmaceutical company Bayer sank 4.2% on Friday after other pharma and chemical giants predicted that their earnings would be affected negatively due to the rising amount of inventories in its Brazil operations.
Despite this, German stocks such as Deutsche Bank recorded its highest level in five weeks as investors and traded 2.8% higher on Tuesday. This was due to the investor optimism that the global central banks will tighten policies gradually and will offer more profitability for global lending companies.
Although most European markets were down on Tuesday, the financial sector remained mostly up with the Stoxx 600 Europe Banks Index rising 4.5% since Draghi’s statement in Portugal regarding the possibility of the European Central Bank starting to taper purchases in its asset purchase program.
Most European stocks also lost ground after most yields in the United Kingdom and European bonds rallied as the euro went 2% higher against the US dollar last week.
Shares outside the Eurozone also declined following North Korea’s ballistic missile test with South Korea’s currency hitting a 16-week low. Asian indexes such as Japan’s Nikkei was 0.1% down while KOSPI from South Korea ended 0.6% lower as the ballistic missile reportedly landed in Japanese waters.