North Korea tensions are set to cause a stir on Wall Street

North Korea tensions are set to cause a stir on Wall Street

With the tense mood pushing European shares down for a third day and Wall Street set to fall again, global stocks were on course for their worst week since Donald Trump won November's US presidential election.

Russia's foreign minister says the risk of a military conflict between the US and North Korea is "very high", while Germany's chancellor says she doesn't see a military solution to the rising tensions.

The North Korean state media, describing President Donald Trump's warning of "fire and fury" as a "load of nonsense" said they aim to develop a plan by mid-August to launch four missiles at the us territory of Guam.

The benchmark USA 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.

Japan is the world's biggest creditor nation and there is an assumption Japanese investors may repatriate their foreign holdings in times of heightened global uncertainty.

The Swiss franc on Wednesday held near the day's highs after posting its biggest single-day rise against the euro since the central bank removed its cap on the currency in January 2015. With one session left to go, the S&P 500 was headed for a weekly drop of around 1.6%, which would be its biggest since a fall of 1.9% for the week ended November 4, 2016. This week has seen its biggest rise since June 2016.

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

Many markets had already been at record or multi-year highs after an extended rally, leaving them vulnerable to a sell-off.

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.

These have ranged from an investigation into Russia's possible interference in the 2016 USA presidential election, to concerns about China's risky debt levels, to stubbornly low inflation in the US. The euro zone's version is at its highest since April, when France's election was rattling the region.

Asian equity markets tumbled lower on Friday amid the risk aversion, and European stocks are likely to extend losses as uncertainty accelerates the traders' flight to safety.

"Of course, it's all come at a time when share markets are due for a correction, so North Korea has provided a ideal trigger".

South Korea's KOSPI fell 1.7 percent to its lowest since May 24, but its losses for the week are a relatively modest 3.2 percent. "Pretty remarkable, perhaps even extraordinary, considering", said Tim Ash, strategist at fund manager BlueBay.

The Dow Jones Industrial Average (.DJI) fell 204.69 points, or 0.93 percent, to close at 21,844.01, the S&P 500 (.SPX) lost 35.81 points, or 1.45 percent, to 2,438.21 and the Nasdaq Composite (.IXIC) dropped 135.46 points, or 2.13 percent, to 6,216.87.

Asked if he would consider a pre-emptive strike against North Korea to deny it the ability to launch a nuclear attack against the United States, Trump said, "We'll see what happens".

"This situation is beginning to develop into this generation's Cuban Missile crisis moment", ING's chief Asia economist Robert Carnell wrote in a note.

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

Benchmark 10-year notes last rose 5/32 in price to yield 2.194 percent, from 2.211 percent late on Thursday.

Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in USA crude inventories. Palladium added 0.4% to $899.80 per ounce and was on track to end the week about 2% higher.

The pan-European FTSEurofirst 300 index (.FTEU3) lost 1.11 percent.

Away from the geopolitical drama, USA inflation data is due at 1330 GMT. Another source of support to bullion was data showing USA producer prices unexpectedly fell in July, pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.

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