Markets on the rise as tensions on the Korean Peninsula subside

Every sector on the Stoxx Europe 600 Index inched forward after Donald Trump's written response to Pyongyang's missile launch.

Kim Jong-un's statements that a missile fired over Japan in the early hours of Tuesday morning was intended to be nothing more than a formal objection to annual military drills between Seoul and Washington currently being held in South Korea seemed to suggest the situation would not escalate further.

Japan's Nikkei, Hong Kong's Hang Seng, and South Korea's KOSPI all rose, and the US Dollar closed stronger as the Euro Dollar lagged.

Michael Hewson, chief market analyst at CMC Markets UK said, "Despite the escalation in tension and the universal condemnation the missile launch has provoked, US markets, despite initially opening sharply lower, rallied strongly in the afternoon session to close the day higher."

"It is true that flare ups on the Korean peninsula are nothing new and previous instances have always resulted in a winding back of tension, and it would appear that US investors have decided that recent events are likely to go the same way, as the markets “muscle memory” of selling the panic and then buying the dip kicked in," said Hewson. "In ordinary circumstances, this might seem sensible, however, the events of the last few weeks can hardly be described as ordinary, which suggests that markets could be being rather naïve that current events can be contained."

The 15-member United Nations Security Council met on Tuesday evening and condemned North Korea's "outrageous" firing of a ballistic missile over Japan's airspace, before demanding that Pyongyang cease all its missile tests and weapons programs.

Ambassadors from China and Russia said the deployment of American missile defence systems in South Korea should be scrapped and Vassily Nebenzia, the Russian ambassador said the Ulchi Freedom Guardian exercises ought to be toned down in order to appease Kim Jong-un.

Prime Minister Theresa May demanded China put more pressure on North Korea to stop missile tests.

Kim Jong-Un said in a statement published by state mouthpiece KCNA, "The current ballistic rocket launching drill like a real war is the first step of the military operation of the Korean People's Army in the Pacific and a meaningful prelude to containing Guam."