LONDON: World stock markets and the dollar slid on Wednesday after US President Donald Trump warned of “fire and fury” in retaliation for North Korea’s nuclear ambitions, sending traders fleeing to safe-haven investments.
North Korea raised the stakes just hours later, saying it was considering missile strikes near US strategic military installations on the Pacific island of Guam.
Trump’s comments marked a sharp intensification of Washington’s rhetoric over the nuclear and missile programmes of North Korea.
The comments dragged Wall Street down into negative territory in late Tuesday trading, snapping a nine-day streak of record closes by the Dow.
US stocks fell further on Wednesday with Trump taking to Twitter to say that the United States’ nuclear arsenal was now “more powerful than ever before” in a fresh warning to North Korea.
“US stocks are lower in early action, with sentiment getting uneasy as geopolitical tensions ramped up on Tuesday between the US and North Korea, while some cooler-than-expected Chinese inflation reports are doing little to support conviction,” said analysts at the Charles Schwab brokerage.
In Europe, equities dived with London losing 0.6%, while Frankfurt shed 1.1% and Paris fell 1.4%.
The news was also greeted with dismay by traders in Asia, with Tokyo down 1.3%, Hong Kong losing 0.4% and Seoul registering a 1.1% decline.
Investors shunned risky equities and flocked instead to traditional safe-havens like precious metal gold, the Japanese yen and bonds.
In foreign exchange activity, the dollar hit a two-month low at 109.56 yen, while the euro struck a three-week trough against the Japanese unit.
“European stocks have suffered greatly today (Wednesday) as traders were prompted to cut-and-run due to the escalating tensions between the US and North Korea,” said market analyst David Madden at CMC Markets UK.
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