I was going to relegate this story to Links, but it is escalating before my eyes.
North Korea is known for saber rattling and firing rockets that conveniently fall in the ocean when the verging-on-starvation nation needs a handout. But even at the outset, its latest move looked uncomfortably more belligerent than its usual ploys.
Initial reports, such as one in the Wall Street Journal, described the North Korean attack, and indicated the response was local at that juncture. The updates give more details of the extent of the attack and the South Korean response, which now includes sending jets to the area. First the Journal on the North Korean barrage:
North Korea fired artillery rockets at South Korea’s Yeonpyeong island Tuesday afternoon, setting houses on fire in its small villages and injuring several people.
Photos sent to South Korean TV stations by residents of nearby So-yeonpyeong island showed multiple plumes of smoke rising over its larger neighbor.
South Korea returned fire and 14 of its soldiers were injured, military officials said. The military dispatched fighter jets to the area. A spokesman for South Korea’s Joint Chief of Staff said “scores of rounds” were fired by the North.
“The whole neighborhood is on fire,” said Na Young-ok, a 46-year-old woman who has lived on the island for 20 years. She was reached at a bomb shelter when reached by The Wall Street Journal. “I think countless houses are on fire, but no fire truck is coming. We have a fire station but the shots are intermittently coming.”
Ms. Na said a military base on the island was on fire. She said she was with about 50 people in the shelter and her child was in a similar shelter at the school on the island. She didn’t know whether people were injured.
The Washington Post provides more context:
Tensions between the two Koreas also remain tense after the sinking in March of a South Korean warship in which 46 sailors died. Seoul has blamed a North Korean torpedo, while Pyongyang has denied any responsibility.
The countries’ western maritime boundary has long been a flash point between the two Koreas. The North does not recognize the border that was unilaterally drawn by the United Nations at the close of the 1950-53 Korean War.
North and South Korea have fought three bloody skirmishes near the maritime border in recent years, most recently in November 2009.
Bloomberg tells us Mr. Market is not happy:
Asian stocks and U.S. index futures extended losses while the yen dropped after North and South Korea exchanged artillery fire. The euro fell on speculation an election in Ireland will hinder the nation’s aid talks.
The MSCI Asia-Pacific excluding Japan Index declined 2 percent to 455.42 as of 2:45 p.m. in Hong Kong, set for its biggest loss since Nov. 12. Futures on the Standard & Poor’s 500 Index sank 0.9 percent while those for the Euro Stoxx 50 Index lost 0.6 percent. The yen weakened 0.4 percent to 83.63 per dollar. Japan’s markets are closed for a holiday….
“A bubbling over of tensions in Korea is another layer of uncertainty for markets that they don’t need to contend with,” said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. “There’s enough going on in terms of European debt problems and Chinese inflation without having to deal with erupting geopolitical tensions.”
Yes, I’m sure investors deem it mighty discourteous to have a big international row now, particularly when the end of the year is a time of generally lower liquidity. The Financial Times’ John Dizard said that the smart money was betting that the eurozone crisis wouldn’t erupt in full form till late second quarter or August. Other events may conspire to give them a rough ride sooner than they expected.