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North Korea trumps iron ore and NAB

On what might otherwise have been a solid day for the stock market, the ASX 200 is set to open lower in response to the escalating rhetoric between Donald Trump and Kim Jong-un.

The latest threats over North Korea have finally escalated to the point where market has been obliged to react. This has injected the first note of volatility into US stock markets for some time. US markets had previously been becalmed amidst the Goldilocks scenario of strong profit growth, low interest rates and full valuations. Difficult to assess political risk is now intruding on this scenario.

While it’s too early to assume that last night’s risk off moves will translate into anything more than a minor move, the extent of the selling momentum creates the risk there will be at least some follow through . High value stocks were most in the firing line in US markets last night and local market darlings might also be the ones to attract most selling by trigger happy profit takers today.

Yesterday’s lift in the iron ore price and a solid quarterly report by NAB might otherwise have produced a decent close to the week for the local market. However, concerns about North Korea look set to outweigh these factors at the open.

NAB has produced a clean quarterly report. Investors will be encouraged that recent mortgage repricing appear to have helped NAB’s net interest margin to improve while the bank continues  to reap the benefit of its ongoing  productivity program.

By contrast, this morning’s reports that ASIC is considering opening up another regulatory front for CBA by pursuing a case against its directors will be a concern for investors. Such a move will expose the bank to another distracting and potentially damaging reputational issue. 

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