LONDON: World stock markets and the dollar slid Wednesday after US President Donald Trump warned of "fire and fury" in retaliation to North Korea's nuclear ambitions, sending traders fleeing to safe-haven investments.
North Korea raised the stakes just hours later, saying it was considering missile strikes near US strategic military installations on the Pacific island of Guam.
Trump's comments marked a sharp intensification of Washington's rhetoric over the North's nuclear and missile programmes, which saw a seventh set of United Nations sanctions imposed on it at the weekend.
"North Korea best not make any more threats to the United States," said Trump, speaking from his golf club in New Jersey on Tuesday. "They will be met with fire and fury like the world has never seen."
The comments dragged Wall Street down into negative territory in late Tuesday trading, snapping a nine-day streak of record closes by the Dow.
US stocks fell further at the opening bell on Wednesday, with the Dow sliding 0.3 percent.
"US stocks are lower in early action, with sentiment getting uneasy as geopolitical tensions ramped up yesterday between the US and North Korea, while some cooler-than-expected Chinese inflation reports are doing little to support conviction," said analysts at the Charles Schwab brokerage.
In Europe, equities dived with London losing 0.7 percent, while Frankfurt shed 1.3 percent and Paris fell 1.6 percent .
The news was also greeted with dismay by traders in Asia, with Tokyo down 1.3 percent, Hong Kong losing 0.4 percent and Seoul registering a 1.1-percent decline.
Investors shunned risky equities and flocked instead to traditional safe-havens like precious metal gold, the Japanese yen, and bonds.
In foreign exchange activity, the dollar hit a two-month low at 109.56 yen, while the euro struck a three-week trough against the Japanese unit.
"There has been a distinct souring of risk appetite since the European close last night with rising tensions between the US and North Korea causing investors to sell equities and move into traditional safe-haven assets such as gold and the Japanese yen," added analyst David Cheetham at London-based broker XTB.
- 'Unpredictable' North Korea -
North Korea has exploded onto traders' screens in a hitherto subdued and quiet August trading week.
"A week of low volatility has been hit with an unexpected rush to safe havens as the US-North Korean feud has ratcheted up once more," noted IG analyst Joshua Mahony.
"No sooner had Trump warned of 'fire and fury' in the event of further threats from North Korea, than the breakaway nation responded with exactly just such a threat, announcing plans for a potential attack on the US airbase in Guam," he added.
"The unpredictable nature of North Korea means it is hard to gauge exactly how likely an attack is, yet given the military power of both nations, there is no surprise we are seeing markets shift out of risk assets."
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