Trump ratcheted up his rhetoric toward North Korea on Thursday, saying it should be "very, very nervous" if it even thinks about attacking the United States or its allies, after Pyongyang said it was making plans to fire missiles over Japan to land near the U.S. Pacific territory of Guam.
European markets drop: The UK's FTSE 100 has opened down 0.60% on Wednesday morning. It is heading for a 2.5% drop for the week.
"As a result all major U.S. markets closed lower for the first time in over two weeks, and this weakness unsurprisingly has spilled over into Asia markets as well, as geopolitical tensions prompt some nervousness, particularly since North Korea's state media suggested that they examining the prospect of a missile strike near the USA base in Guam".
"While the US President insists on ramping up the war of words, there is a decreasing chance of any diplomatic solution", Mr Carnell said. "We see many of our new enquiries and clients using the opportunity to protect themselves against an uncertain future, especially given the unpredictability of both President Trump and Kim Jong-Un".
Stock markets extend losses at open
Retailers slid after department stores Macy's and Kohl's both said same-store sales continued to decline in the second quarter. Shortly after this announcement, North Korea said it was "carefully examining" the idea of a missile strike on Guam, a U.S.
His second warning, however, has shaken markets that have been largely resilient this year, swatting away a slew of risks.
S&P 500 e-mini futures were down 0.2 percent, while the dollar dipped 0.2 percent against its perceived safe-haven Japanese counterpart to 110.12 yen.
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.
In worldwide trade, gold scored its strongest weekly gain in four months to settle at the highest level in more than two months, as simmering North Korean tensions buoyed haven demand for precious metals.
The Swiss franc, by contrast, was on track for its biggest single-day rise against the euro in more than two-and-a-half years. The dollar index slipped to a one-week low on Friday after the United States data. This downfall, which was the biggest one in 11 months, surprised analysts who expected producer prices to climb by 0.1% instead as with a month ago.
Markets are now awaiting USA consumer price data for July, due later today.