Wall Street put a floor under global equities on Friday after a weak inflation reading brought investors back into US stocks even as tensions between the United States and North Korea continued to escalate, though that tension still drove safe-haven buying of gold and the yen.
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 US Pacific territory of Guam.
The sell-off is likely to extend into the European session, with financial spreadbetter CMC Markets expecting Germany's DAX and France's CAC 40 to open down about 0.7 percent each and Britain's FTSE 100 to start 0.55 percent lower.
The pan-European FTSEurofirst 300 index lost 1.01 percent and MSCI's gauge of stocks across the globe shed 0.26 percent for a weekly loss of 1.6 percent, the largest since the week to November 4. It is heading for a 2.5 percent drop for the week. The Japanese currency rallied broadly against most major currencies.
Baker Avenue's Lip said the US market was higher due to "bargain hunters", but "there's more room for the market to come down".
"It's surprising that given Japan's proximity to North Korea the yen is seeing any benefit from risk aversion", said Lennon Sweeting, chief market strategist for XE.com, in Toronto.
"Of course it's all come at a time when share markets are due for a correction so North Korea has provided a ideal trigger". MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.47 percent lower.
Chinese bluechips lost 1.6 percent, while Hong Kong's Hang Seng was 1.9 percent lower.
"The war of words between the leaders of the USA and North Korea continues to dominate investor sentiment", said Forex.com technical analyst Fawad Razaqzada.
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.
The dollar index fell 0.3 percent, with the euro up 0.36 percent to $1.1812.
The dollar widened losses against the yen to hit a two-month low.
The dollar was down 0.77 percent against the yen at 109.21 yen.
"The yen is the big story really".
But "the yen may be expected to lose its safe haven status if U.S".
Against the Swiss Franc, the dollar erased earlier losses to traded little changed on the day.
The Dow Jones Industrial Average rose 44.33 points, or 0.2 percent, to 21,888.34, the S&P 500 gained 6.01 points, or 0.25 percent, to 2,444.22 and the Nasdaq Composite added 32.10 points, or 0.52 percent, to 6,248.97.
Investor focus now turns to Friday's U.S. consumer price index data.
European markets also slid in early trade after Wall Street indices suffered their biggest losses in almost three months Thursday, while the dollar struggled to recover from eight-week lows below 109 yen as investors fled to safe haven assets.
After touching a more than two-month high, spot gold last added 0.1 percent to $1,287.18 an ounce. Its weekly gain of 2.6 percent is the largest since June 2016.
Crude futures extended losses on fears of slowing demand and lingering concerns over a global oversupply.
US crude rose 0.41 percent to $48.79 per barrel and Brent was last at $52.01, up 0.21 percent.
Sterling was last trading at $1.3007, up 0.25 percent on the day. It is poised to end the week down 1.9 percent.