Equities slid and the Swiss franc and some developed-market government bonds advanced as President Donald Trump threatened North Korea with "fire and fury" following a series of missile tests by the communist regime, boosting demand for haven assets.
A day earlier, the Standard & Poor's 500 index posted its biggest single-day drop in almost three months following Trump's warning to unleash "fire and fury" if Pyongyang continued its nuclear weapons expansion. "The VIX index of implied future volatility on the S+P 500 index (the so-called 'fear index), jumped to a three-month high of over 15, and we saw growth-orientated stocks under-perform their value counterparts across developed stock markets".
Stocks ended more than one percent down in Seoul while the won slumped to a three-week low against the dollar as the U.S. president and South Korea's volatile neighbour dramatically ramped up their war of words. Tokyo's Nikkei 225 share index closed down 1.3% at its lowest since June 1 as the strong yen hit exporters, while South Korea's KOSPI index fell 1.1% to seven-week lows.
North Korea responded with a statement by its official KCNA news agency claiming Trump is "driving" the Korean peninsula to the "brink of a nuclear war". The Dow slumped 204.69 points or 0.9% to 21,844.01, the Nasdaq plummeted 135.46 points or 2.1% to 6,216.87 and the S&P 500 tumbled 35.81 points or 1.5% to 2,438.21. North Korea also laid out detailed plans of how it would launch a missile strike on US military bases in Guam. Major U.S. indices had posted record highs in recent weeks.
In Australia mining stocks also benefitted from the strength of gold. The Korean won fell against the USA dollar.
Shares slip, yen and gold gain as Korea tensions escalate
The market also awaited U.S. consumer inflation data on Friday that would offer more clues about the pace of the U.S. Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in USA crude inventories.
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Gold, another classic safe haven asset, was trading at around $1,292 per ounce, up more than two percent this week and near a nine-week high.
Shares in several other big media companies also declined.
According to analyst Simona Gambarini, the price of gold "tends to rise in anticipation of a conflict but often falls when tensions turn into a full-blown war".
Investors bought bonds after the Labor Department said the consumer-price index increased 0.1% in July from the previous month. Odds of a Fed rate rise during the December meeting now stand at around 40% according to the CME Group's 30-day Fed Fund futures prices. EIA reported that United States crude inventories fell last week as refineries boosted output to the highest percentage of capacity in 12 years.
The dollar slipped to 109.04 yen from 109.26 late Thursday. The Swissie also edged higher against the Euro, recording one of the largest single day rises since the January 2015 removal of the "peg" placed by the Swiss National Bank. The NYSE Arca Biotechnology Index plunged by 3.4% to its lowest closing level in well over a month.