"What has changed this time is that the scary threats and war of words between the US and North Korea have intensified to the point that markets can't ignore it", said Shane Oliver, head of investment strategy at AMP Capital in Sydney.
In the latest economic data, the consumer-price index (http://www.marketwatch.com/story/us-consumer-inflation-remains-soft-in-july-cpi-shows-2017-08-11) rose a seasonally adjusted 0.1% in July, its fifth straight month of softness, raising more questions about whether inflation will eventually rise to hit the Federal Reserve's 2% annual rate target.
Intensifying turmoil between the United States and North Korea continued to strain forex markets across the globe and to lift demand for assets perceived as safe havens for the second day.
Chinese bluechips lost 0.75 percent, while Hong Kong's Hang Seng was 1.6 percent lower. However, the early gains were short-lived as the New Zealand dollar tumbled to the lowest since July 18 to last trade at $0.7278.
A Reuters Datastream index of more than 7,000 stocks across the globe saw its market capitalisation drop from a record high US$61.36 trillion on Monday to US$60.43 trillion at the close on Thursday. In a tweet, President Donald Trump warned of military action "should North Korea act unwisely", noting that the U.S.is "locked and loaded". The dollar index was up 0.15% to 93.68 as both the euro and sterling weakened against the greenback.
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.
NORTH KOREA: President Donald Trump warned North Korea of "fire and fury" this week in response to recent threats from Pyongyang, which said it was examining plans for attacking Guam, a US territory in the Pacific with a military base. The Nasdaq is on track for a weekly loss of 1.5%, its worst since June.
Inflation has risen 1.7 percent over the past 12 months, suggesting that inflation pressures remain well under control.
"Today's inflation data put the Fed on pause and really diminishes the fact that there's still some noise going around with the North Korea-U.S. situation", said Phil Blancato, CEO of Ladenburg Thalmann Asset Management.
US President says decision on Afghanistan strategy very close
The statement is a direct response to bipartisan criticism of the ultimatum Trump issued to North Korea on Tuesday. Other foreign leaders raised questions about whether there was a military option in North Korea.
Equity markets had traded with a soft tone in Europe and there was a sharp increase in selling pressure in NY with the S&P 500 index declining by close to 1.0%.
Korea's Samsung Electronics fell 2.8% Friday.
J.C. Penney sank 16.6 percent after the struggling department store chain reported quarterly results that fell short of Wall Street's expectations. 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.
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.
Gold added $3.90 to settle at $1,294 an ounce.
The yen and gold continued rising, while the Swiss franc took a breather against the dollar (last trading at 0.9660 francs) and the euro, but kept most of its yesterday's hefty gains.
In Europe, the Stoxx 600 Index fell 1%. Australia's S&P/ASX 200 dropped 1.2 percent.
ASIA'S DAY: Japan's benchmark Nikkei 225 inched down less than 0.1 percent to finish at 19,729.74. Trading was thinner than usual, with Japanese markets closed for a public holiday. Australia's S&P/ASX 200 edged down almost 0.1 percent to 5,760.90, while South Korea's Kospi fell 0.5 percent to 2,357.84.