United Kingdom stocks finished sharply lower on Friday, as escalating tensions between the USA and North Korea helped drive a global selloff and left British blue-chips with their worst weekly performance in almost four months.
A small rise in a measure of United States consumer prices pointed to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year, which would be favorable to equity investors.
Still, analysts said the market seemed to be a bit skeptical that the North Korea situation would grow into a major crisis, noting that the losses were still not that deep.
He said it is "a bullish sign that the equity markets are rebounding somewhat on a Friday, in spite of the fact that investors will need to wait for two days to react to any geopolitical news that comes out over the weekend". While the Nasdaq climbed 39.68 points or 0.6% to 6,256.56, the Dow inched up 14.31 points or 0.1% to 21,858.32 and the S&P 500 edged up 3.11 points or 0.1% to 2,441.32.
The focus on North Korea has largely overshadowed a Labor Department report showing an unexpected drop in USA producer prices in the month of July.
Nauert says Secretary of State Rex Tillerson spoke to Trump for about an hour after Trump warned Tuesday of "fire and fury" if North Korea escalated its threats.
However, the S&P was still not far off record levels.
The suspected range of North Korea's missiles based on their ICBM tests. Chris Jones IFLScience
The Nasdaq Composite was down 115.35 points, or 1.82 percent, at 6,236.98.
In U.S. markets, the S&P 500 Index fell 1.5 percent Thursday, the most in three months, and the CBOE Volatility Index soared 44 percent. Germany's DAX was up 0.1 percent, while France's CAC 40 fell 1.1 percent.
The yen on Friday added to a strong weekly rally against the dollar of close to 1.5 percent, hitting its highest versus the greenback in nearly four months, at 108.73 yen. Hong Kong's Hang Seng Index plunged by 2%, while South Korea's Kospi Index slumped by 1.7%.
BONDS: Bond prices fell.
Investors opted for the perceived safety of US Treasuries, which pushed the yield on the 10-year note three basis points lower to 2.21%.
Nauert says the pressure by the USA and others on Pyongyang "is working". Markets in greater China mirrored the slide in global equities.
The S&P is trading near its most expensive valuation level since 2004, as measured by the price-to-12-month forward earnings ratio. Brent crude, used to price global oils, gained 56 cents to $52.70 in London.
And in a textbook-type cross-asset move toward safety in times of trouble, the Japanese yen hit an eight-week high against the US dollar while spot gold also reached a two-month high. Economists had expected another 0.1 percent uptick.
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