Historically, Pyongyang has resorted to this kind of tactic to draw international attention and restart talks. It is likely that today’s attack was also motivated by the desire to initiate discussions again. Although we expect significant international pressure to keep the North/South situation calm, which should allow markets to return to some normality, with only relatively vague details available at this juncture (e.g uncertainty over the full number of casualties; the extent of multilateral sanctions) it is difficult to judge whether this will be a prolonged event for markets.However, strong hands make bold decisions? Danske opines that status quo no longer an option.
The real drama, though, is and will be played in Europe, in my opinion. The Gods of Finance should save the Italy, but Spain is clearly on the path to challenge the credit ... as the cash benchmark yield spreads to Germany reveal today, see the chart below.