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Tensions over North Korea weigh on stocks but boost gold

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European Shares Plummet

But although USA equities on Wednesday managed to close only slightly down even after Trump's warning that "fire and fury" would rain on North Korea, on Thursday the chickens came home to roost on Wall Street.

Reuters data show a 22 per cent perceived chance for a rate increase after the Fed's December meeting. Indeed, US equities sold off at the open and added to those losses this afternoon following President Trump's latest warning to North Korea.

More than 430 stocks from all US exchanges hit their lowest levels in 52 weeks or more on Thursday, the most for any session since mid-November right after Trump was elected.

"There's not a great incentive to buy big", said Lerner of SunTrust Advisory.

"I will tell you this, North Korea better get their act together or they're going to be in trouble like few nations ever have been in trouble in this world", Trump said.

"Pretty remarkable, perhaps even extraordinary, considering", said Tim Ash, strategist at fund manager BlueBay.

He said the crisis provided a "perfect trigger" for a correction at a time when many markets - including the FTSE 100 - were at or around record highs, leaving them vulnerable to a sell-off if investors think it is time to take profits.

The U.S. dollar inched up against the Japanese yen and the Swiss Franc on Friday, erasing earlier losses, after Russian Foreign Minster Sergei Lavrov said there was a Russian-Chinese plan to defuse tensions between the United States and North Korea.

The Korean won continued to fall versus the dollar, down 0.13 percent to 1,143.5 on Friday for a 1.6 percent decline on the week.

Looking at currency movements during the Asian session, the yen continued strengthening against the dollar, with the pair trading below the 110 level at 109.96 ahead of European trading.

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The dollar was further weighed down on Friday by the soft USA inflation data.

The dollar index was up 0.15% to 93.68 as both the euro and sterling weakened against the greenback.

In bond markets, the yield in U.S. Treasuries fell, also pressured by the lowered expectations for a Fed move.

Benchmark 10-year notes last rose 7/32 in price to yield 2.1888 percent, from 2.211 percent late on Thursday.

The 30-year bond last /32 in price to yield 2.7933 percent, from 2.794 percent late on Thursday.

Gold, another classic safe haven asset, was trading at around US$1,285 per ounce, up more than two percent this week and near a nine-week high.

Wall Street's so-called "fear gauge", the CBOE Volatility Index, hit the highest levels since Election Day on Friday (http://www.marketwatch.com/story/wall-streets-fear-gauge-on-course-for-biggest-weekly-surge-in-2-years-2017-08-11), after a spike on Thursday but was retreating in recent trade.

Oil prices rose nearly half a percent in today's trading following a bigger-than-expected drop in USA crude inventories.

U.S. 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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