Correction to Trump Rhetoric Sinks Global Stocks Story

By Justin Yang and Kenan Machado Features Dow Jones Newswires

Global stocks tumble on further North Korea rhetoric

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-- Wall Street poised for another lower opening

-- Haven assets rise

World stocks fell again Friday following an escalation of threats exchanged between the U.S. and North Korea.

The Stoxx Europe 600 was down 1.1% in morning trade, while futures signal the S&P 500 would open down 0.2% and the Dow Jones Industrial Average would open 0.1% lower.

The Dow closed down 205 points Thursday, in its biggest decline since May 17, after U.S. President Donald Trump rejected criticism that his threats to release "fire and fury" had been too inflammatory. Instead, he said his statement "maybe wasn't tough enough."

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"Clearly the market's taken a bit of a black eye," said Fahad Kamal, senior market strategist at Kleinwort Hambros, commenting on how the markets reversed course after a strong start this week.

The U.S. blue chip index is down 1.1% this week and the S&P 500 is 1.6% lower.

Appetite for so-called haven assets continued to support gold, which rose 0.3% Friday to $1,294.00 a troy ounce. The yield on U.S. 10-year Treasurys slid to 2.191% Friday from 2.211% Thursday. Yields move inversely to prices.

"This situation is beginning to develop into this generation's Cuban missile crisis," said ING's Robert Carnell in a morning note to clients.

The CBOE Volatility Index--a measure of investors' expectations for swings in the S&P 500 over the next 30 days--surged 44% to 16.04 Thursday--its highest level since U.S. Election Day. The index has rocketed 71.2% this week.

The rising tensions and the typical late-summer slowdown in trading proved to be an opportunity for investors who have logged strong 2017 gains to pull back and wait.

"Given the great run we've had, seems like some sort of pullback wouldn't be surprising," Michael Baele, managing director of investments at U.S. Bank Private Wealth Management, said.

Apart from the war of words between Pyongyang and Washington, the market faces fresh uncertainties from central banks and politicians in the second half of 2017.

The Federal Reserve's hint about unwinding balance sheets, the possibility of the European Central Bank tapering stimulus and the looming debate about the U.S. debt ceiling in the fall challenge the market's recent performance, Mr. Baele said.

"There's a lot of unknowns out there; we're past the good news of earnings," he said.

The U.S. consumer-price index, set for release before Wall Street opens, will be closely monitored by investors for clues on inflation and the Fed's next move, said Mr. Kamal. Thursday's producer-price index came out tepid, analysts said.

In Asia, benchmarks in Hong Kong and South Korea--which had been one of the best performers of 2017--closed down 2% and 1.7% respectively, Friday, putting the week's drop at 2.5% and 3.2%.

Korea's Samsung Electronics fell 2.8% Friday and was down 6.1% on the week. China's Tencent Holdings, whose surge of about 70% in 2017 was key to the Hang Seng's gains, fell 4.9% Friday.

Despite the drop, markets have shown resilience, with Korea's Kospi still up 14.5% in 2017. The Hang Seng is up 22.2% for the year.

In China, selling deepened as Friday progressed. Beijing warned of irrational trading in metals, with steel-rebar futures down 2.7% on Friday.

When Japanese traders get back to their desks Monday, stocks will need to catch up with Friday's regional weakness and the yen's recent gains against the dollar. The WSJ dollar index, which measures the greenback against a basket of currencies, was up 0.1%.

Kevin Kingsbury

contributed to this article.

Write to Kenan Machado at kenan.machado@wsj.com

Corrections & Amplifications

This article was corrected at 1111 GMT because the original incorrectly said they had fallen by this amount on the year. Steel-rebar futures fell 2.7% on Friday.

Steel-rebar futures fell 2.7% on Friday. "Trump Rhetoric Sinks Global Stocks -- 3rd Update," at 1106 BST, incorrectly said they had fallen by this amount on the year.

(END) Dow Jones Newswires

August 11, 2017 07:17 ET (11:17 GMT)