"The war of words taking place between the USA and North Korea at the moment, which includes very real threats of action, is taking its toll on investor sentiment".
The hope that the Fed will have to slow its rate-hike path appeared to stop, at least for now, the near $1-trillion loss in world stocks valuations this week triggered by the war of words between Pyongyang and Washington.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.77 percent, on track for its third straight day of declines as it pulled further back from all-time highs.
The FTSE 100 fell by more than 100 points as global investors continued to act on North Korea-related jitters.
Investors instead turned to safe-haven assets such as gold, pushing it to a two-month high, and the Japanese yen rose.
The rhetoric between the U.S. and North Korea has continued to heat up, leading traders to look to safe havens such as gold and treasuries. Hong Kong's Hang Seng Index dropped 1.69%, while mainland markets saw the Shanghai Composite dip 1.04%.
Simmering tensions between the United States and North Korea have come back to the boil in recent days after Pyongyang disclosed plans to fire missiles over Japan to land near America's Pacific territory of Guam.
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The latest United States economic data cemented expectations that inflation will remain subdued amid a robust labour market.
North Korea appears more emboldened than ever, and, due to years of failed American foreign policy, it is closer than ever to possessing the weapons to finally put some bite behind its bark.
The yen on Friday added to a strong weekly rally against the dollar of close to 1.5 per cent, hitting its highest versus the greenback in nearly four months, at 108.73 yen.
Financial stocks underperformed after U.S. Treasury yields fell as bond prices rose in a flight to safety by nervous investors.
"Both (PPI measures) were well below consensus and give us no hope that consumer price inflation is going to materially beat expectations", said Chris Weston, chief market strategist at IG Markets.
Overall, gold continued to edge higher to the $1,280 per ounce area in European trading.
The benchmark US yield on Thursday was just above 2.2 percent, at its lowest level since late June, as investors bought up Treasuries, a classic safe harbor.
In oil, the price of Brent crude sunk by 0.5% to 51.65 USA dollars a barrel amid concerns about over supply in the market.