Missile tests shake world markets

The missile tests have caused political, but not economic, uproar

North Korea's missile tests have shaken world markets, with share indexes in Europe and the US falling after earlier slides in Asia.

Leading French and UK share indices both slipped by 1%, with their German counterpart slipping by 1.8%.

The main US index, the Dow Jones Industrial Average, lost 0.7%.

South Korean and Japanese shares had earlier fallen sharply before investors regained some confidence, and the main indices closed about 0.5% lower.

It was a similar picture for the South Korean won and the Japanese yen, while gold prices also jumped before falling back as traders took profits.

"In the Asian session overnight, there was a bit of concern about what was happening with these missiles," said Chris Iggo, strategist at AXA Investment Managers.

"The Asian markets were weaker and I think that just followed over into Europe."

Central banks

Although the North Korean missile tests raised the issue of security in the region, the lack of a major sell-off of shares left most analysts feeling that the market impact would be limited.

"Today's market reaction shows that we're not going to see capital flight right away. I am encouraged by the lack of a major knee-jerk reaction sell-off," said Kirby Daley, a strategist at brokers Fimat.

Japan's Nikkei-225 index fell 0.7% to close at 15,524, ending a four-day winning streak.

South Korea's Kospi index ended the session 0.5% lower.

A Bank of Korea spokesman said that the missile launch and its effect on financial markets would be an important consideration ahead of its interest rate meeting this week.

Japan's central bank is expected to respond to the country's economic recovery by raising its key interest rate from zero next week.

Japanese economists said that the missile tests would have a negligible impact on their decision.