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Markets slide, dollar slumps as North Korea fears spike

Markets slide, dollar slumps as North Korea fears spike

"As a portfolio manager, you say, 'Do I think we'll get a war out of this?'" said Torsten Slok, chief global economist at Deutsche Bank, referring to the back and forth between North Korea and President Donald Trump.

"The level which we are looking at now is $1,300".

Japanese markets were closed for a holiday but the tense mood dragged Asian shares lower and an MSCI index of stocks across the globe was on track to post its largest weekly drop since the week before Donald Trump won the USA presidential election in November.

Trump continued to ramp up the rhetoric with a post on Twitter this morning indicating that the USA is prepared to take military action against North Korea.

North Korea had responded to Trump's previous promise to unleash "fire and fury" with a threat to land a missile near the U.S. Pacific territory of Guam.

The Dow Jones Industrial Average .dji rose 38.9 points, or 0.18 percent, to 21,882.91, the S&P 500 .spx gained 5.46 points, or 0.22 percent, to 2,443.67 and the Nasdaq Composite .ixic added 41.86 points, or 0.67 percent, to 6,258.73. BNY Mellon FX strategist Neil Mellor told Reuters that in recent years, "the market hasn't really reacted to things on the Korean Peninsula" because in the past "it [has been] largely North Korean sabre-rattling".

Apart from geopolitical worries, some technical analysts like Tom McClellan, editor of the McClellan Market Report, blamed seasonality for this week's retreat given August's record as a weak month for stocks.

Hong Kong shed more than one percent and Shanghai also closed down, while Seoul shares continued their sell-off after slumping Wednesday, with the won again softening.

A Reuters Datastream index of more than 7,000 stocks across the globe saw its market capitalization drop from a record high $61.36 trillion on Monday to $60.43 trillion at the close on Thursday.

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

Investors also drew some encouragement from new government data showing USA inflation at the consumer level inched higher last month. Natural gas was also flat at $2.98 per 1,000 cubic feet.

"The cooler CPI figures this morning follow similarly lower than expected wholesale price data yesterday and together, have highlighted the extremely benign inflation backdrop that has reduced expectations for Fed lending rate hikes in the months ahead", said Omer Esiner, an analyst at Commonwealth Foreign Exchange.

Sterling was last trading at US$1.3007, up 0.25 per cent on the day.

The Japanese yen last strengthened 0.03 percent versus the greenback at 109.22 per dollar. On the Nasdaq, 1 378 issues rose and 892 fell.

"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", TD Securities said in a research note. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 2.3 basis points to 2.189%.

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 30-year bond was last up 4/32 in price to yield 2.7871 per cent, from 2.794 per cent late on Thursday.

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

US crude fell 0.41 percent to $48.39 per barrel and Brent was last at $51.68, down 0.42 percent on the day.