LONDON MARKETS: FTSE 100 Drops To 3-month Low As Trump 'ups The Ante' In North Korea Standoff

Old Mutual shares fall after earnings

U.K. stocks finished sharply lower on Friday, as escalating tensions between the U.S. and North Korea helped drive a global selloff and left British blue-chips with their worst weekly performance in nearly four months.

The FTSE 100 index slumped 1.1% to 7,309.96, the lowest close since May 8, FactSet data showed. For the week, the London index fell 2.7%, the biggest loss since the week ended April 21.

On Thursday, U.S. President Donald Trump said his earlier threat to unleash "fire and fury" on North Korea "maybe wasn't tough enough." (http://www.marketwatch.com/story/trump-today-president-tweets-get-back-to-work-at-senate-majority-leader-mcconnell-2017-08-10) Then on Friday, the president said military solutions are "locked and loaded" (http://www.marketwatch.com/story/trump-says-north-korea-military-solutions-locked-and-loaded-what-it-will-take-to-avoid-a-war-2017-08-11) in case North Korea acts "unwisely."

Additionally, China weighed in on the standoff, saying in an editorial in state-run Global Times (http://www.globaltimes.cn/content/1060791.shtml) that Beijing will intervene if the U.S. strikes first against North Korea.

"Trump has upped the ante so the market is having to price in possible military intervention," said Jasper Lawler, head of research, at London Capital Group, in a note.

Read:What to do with stocks if the U.S. and North Korea go to war (http://www.marketwatch.com/story/what-to-do-with-stocks-if-the-us-and-north-korea-go-to-war-2017-08-10)

Howard Gold:A new missile crisis is here, and Trump is no JFK (http://www.marketwatch.com/story/a-new-missile-crisis-is-here-and-trump-is-no-jfk-2017-08-10)

"Love or loathe him, Trump isn't one to back down from a confrontation, so it's perhaps not a surprise that things have escalated. North Korea responding with a threat to U.S. territory after Trump warned them not to threaten the U.S. was never going to go down well," Lawler said.

"We assume markets will move on if it remains purely a war of words but the selloff looks durable," he added.

European stocks also fell sharply Friday, leaving the Stoxx Europe 600 with its worst weekly decline since November, just before the U.S. presidential election was held.

Stock movers: Shares of Old Mutual PLC (OML.LN) fell 3.1% even after the company raised its dividend 32% (http://www.marketwatch.com/story/old-mutual-lifts-dividend-32-after-earnings-rise-2017-08-11). The financial services company reported an 87% jump in net profit in the first half of the year.

Mining shares were among biggest the decliners as investors shunned assets seen as more risky. A slowdown in Chinese fiscal spending (http://www.marketwatch.com/story/chinas-fiscal-spending-growth-slows-2017-08-11) also hit commodities stocks, as the sector is highly exposed to growth and spending on infrastructure projects in China.

Rio Tinto PLC (RIO) (RIO)(RIO) dropped 3.2%, Glencore PLC (GLEN.LN) lost 2.9%, Anglo American PLC (AAL.LN) fell 3.1%, and BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) gave up 2%.

(END) Dow Jones Newswires

August 11, 2017 13:04 ET (17:04 GMT)