European stocks tumble and Asia shares test two-month lows as investors react to Trump's threats against North Korea.
A statement from the North Korean military called President Donald Trump's warning that the communist nation would face "fire and fury" if it continued its provocations a "load of nonsense". The Dow Jones Industrial Average, which had been steadily hitting records, posted its biggest decline since May on Thursday, while the CBOE Volatility Index, known as Wall Street's "fear gauge", rose to its highest level of the year.
South Korean stocks ended lower Friday as foreign investors sold local stocks amid escalating tensions between North Korea and the United States.
The Australian dollar, which rose to a 19-month high near 90 yen late in July, was down 0.6 per cent at 86.77 yen after slipping to a one-month low of 86.23 yen.
"The war of words between the leaders of the USA and North Korea continues to dominate investor sentiment", said Forex.com technical analyst Fawad Razaqzada.
The market was also waiting for United States inflation data on Friday that would offer clues about the extent to which the strengthening U.S. labour market is spilling over into inflation.
US stocks recovered temporarily late on Wednesday as investors appeared to brush off the geopolitical concerns following encouraging comments from Secretary of State Rex Tillerson.
Safe havens benefited from the move away from stocks - gold rising again to around $1,290 an ounce after surging 1.3 percent Wednesday - but other risky assets such as oil and copper held their price.
Smaller-company stocks also fell sharply.
North Korea talk drags stocks lower; gold, yen rise
MSCI's broadest index of Asia-Pacific shares outside Japan skidded 1.55 percent, its biggest one-day loss since mid-December. Spot gold inched down 0.1 percent to $1,284.64 per ounce as of 0616 GMT, but was set for a weekly gain of over 2 percent.
The Labour Department said that its Consumer Price Index inched up 0.1% last month, pointing to subdued inflation which could make Federal Reserve policy makers cautious regarding another interest rate hike in 2017.
After North Korea claimed Trump is "driving" the Korean peninsula to the "brink of a nuclear war", the president responded with a tweet suggesting the U.S. is prepared to take military action against the communist nation.
The Nasdaq Composite was up 34.61 points, or 0.56 percent, at 6,251.48. The broader index closed at 2,319.71 points on Friday, down 3.1 percent from a week ago.
The all-important July inflation numbers out of the USA failed to satisfy dollar bulls' hopes of strongly putting a Fed rate hike later in the year back on the table.
This morning global stocks declined for the second day in a row, with the FTSE 100 falling 0.8 per cent to 7,327 points in early trading, while the Dax fell 0.2 per cent and the Cac 40 fell 0.6 per cent. The S&P has lost more than 1 percent on only three days this year.
The dollar last changed hands at 108.96 yen, down 0.2 percent.
Shares Snap fell 1.94, or 14%, to 11.83 after the Snapchat parent reported earnings late Thursday that missed analyst forecasts.
Crude oil prices extended their slide as exports from key OPEC producers rose, despite news of lower crude shipments from Saudi Arabia.