A holiday for us in the UK might mean spending time with family, visiting our favourite place or simply just relaxing. In North Korea, however, it means something entirely different.

Over the weekend, the rogue nation is expected to launch another missile which would coincide with its Foundation of the Republic holiday, the date of its last nuclear test before last Sunday. What could this mean for your current positions and what can you do to protect your portfolio against the ongoing tensions?

Heading into this week, investors have shown that the ongoing tensions in the Korean peninsula are not to be laughed at. After Sunday’s underground nuclear test, the country’s largest in history, the UK’s UK 100  dropped by almost 2% from Friday’s highs of 7460 to Tuesday’s low of 7320.

Risk assets such as Banks, Miners and Airlines all came under pressure, suffering as investors pondered what the impact of North Korea’s latest provocation would be.

However, on the other side of proceedings were the Defensive stocks, so-called because these companies are not subject to seasonal swings in demand or even produce products that are sought after in times of rising tensions – safe-haven assets.

The particular highlights came from Gold Miners Fresnillo (FRES) and Randgold Resources (RRS), both benefiting from increased safe-haven demand for the precious metal. With the precious metal trading a fresh 13-month high on account of the tightly wound rhetoric from the US, the companies traded at 3-month and 12-month highs respectively.

Other stocks that have gained between 2% and 6% already this month are British American Tobacco (BATS), Diageo (DGE) and United Utilities (UU.). 

Should Kim Jung-Un celebrate the national holiday by launching another missile, will these companies mirror this week;s performance over the coming five days?

The other driver of sentiment over the course of this week has been the European Central Bank (ECB). Policymakers announced on Thursday that they would maintain their current course of easy monetary policy – providing €60bn of asset purchases or quantitative easing – until the end of the year, or beyond if necessary.

However, they also announced that they would announce their plans to reduce that asset purchase programme next month. Subsequently, the Euro has rallied sharply to trade a fresh 23-month high against the US dollar, leaving the UK 100 stocks that earn dollar-denominated profits on the back foot.

However, this is just the start of September’s central bank updates.

Next week, policymakers at the Bank of England meet to discuss UK monetary policy. The meeting will be of particular interest following this week’s release of the Bank’s inflation expectations Bank, which noted that it was to remain well above its self-imposed target of 2% at 2.8% for the next 12 months.

Will this force Governor Mark Carney and the rest of the Monetary Policy Committee to act to combat inflation, voting to raise interest rates and increasing demand for Sterling? Or will the MPC continue to hold off from increasing interest rates, potentially taking the shine off the pound to benefit the UK 100 ?

It’s all to play for next week, but it begins straight from the opening whistle on Monday. You’ve got to be in it, to win it.

To make sure you’re kept up to date with this weekend’s events, as well as how stocks in your portfolio are reacting to them, sign up here to receive our award-winning research offering. With a daily Morning Report delivered directly to your inbox before the London market open, you’ll be ready to start the week on the front foot, no matter what gets thrown in your direction.

Suni Dhanjal, 8 September 2017