Stock markets extend losses at open

GBP  JPY Daily Chart

Trump issued a new warning to Pyongyang on Friday, saying in a tweet: "Military solutions are now fully in place, locked and loaded, should North Korea act unwisely".

The dollar index slipped to a one-week low on Friday after the USA data. 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. Trump said on Thursday that his first threat to unleash "fire and fury" may not have been tough enough.

The rhetoric, which began late Tuesday and continued into Friday, interrupted stocks' march higher and cracked the calm that has enveloped the market for months.

"The war of words taking place between the U.S. and North Korea at the moment, which includes very real threats of action, is taking its toll on investor sentiment".

In Asia, several indexes closed lower overnight.

South Korea's KOSPI fell 1.7 per cent on Friday to its lowest since May 24, but its losses for the week were a relatively modest 3.2 per cent.

European stock markets fell further in opening trade on Friday on intensifying fears over North Korea, dealers said.

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.

The yen tends to benefit during times of geopolitical or financial stress as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis materialise.

Despite the past week's decline, the major indexes are in positive territory so far this year, led by the Nasdaq, which is up 16.2 percent.

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The dollar was further weighed Friday by the soft US inflation data. Natural gas was also flat at $2.98 per 1,000 cubic feet.

Minneapolis Fed President Neel Kashkari, who has advocated for the Fed to halt interest rate hikes until inflation picks up gain, on Friday said his colleagues are telling each other "a ghost story (http://www.marketwatch.com/story/feds-kashkari-says-central-banks-hawks-are-spooked-by-ghost-story-of-higher-wages-2017-08-11)" about higher wage inflation that scared them into raising short-term rates.

Shares Snap fell 1.94, or 14%, to 11.83 after the Snapchat parent reported earnings late Thursday that missed analyst forecasts.

But losses soon resumed, with Tokyo edging down as the Nikkei again came under pressure from the strength of the safe-haven yen, which hit eight-week highs Wednesday against the dollar. In bond markets, 10-year US Treasuries and Germany's ultra-safe government bonds were trading at their highest prices since June.

"There are four more (inflation) prints between now and the December FOMC meeting and we expect the Fed to remain data-dependent, if a touch more cautious", said TD Securities in a research note. For the week, the benchmark slipped 2.6%.

The 30-year bond last rose 6/32 in price to yield 2.7847 percent, from 2.794 percent late on Thursday.

Spot gold was up 0.1% at $1,287 per ounce by 2.17pm GMT, set for its biggest weekly gain since April.

Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in US crude inventories, leaving prices volatile.

United States crude rose 0.41 per cent to US$48.79 per barrel and Brent was last at US$52.01, up 0.21 per cent.

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