A Chinese state-run newspaper said on Friday that China should make clear that it will stay neutral if North Korea launches an attack that threatens the United States, but that if the US attacks first and tries to overthrow North Korea's government, China will prevent it doing so.
The sell-off is likely to extend into the European session, with financial spread-better CMC Markets expecting Germany's DAX and France's CAC 40 to open down about 0.7% each and Britain's FTSE 100 to start 0.55% lower. The Japanese market was closed in observance of the Mountain Day holiday.
Investors flocked to gold Wednesday against the backdrop of rising tensions between the USA and North Korea, offsetting some of the broad-based declines on the commodity-heavy Toronto stock index.
The ten-year yield added to the 4.2 basis point loss posted on Wednesday, falling to its lowest closing level in well over a month.
Investors instead turned to safe-haven assets such as gold, pushing it to a two-month high, and the Japanese yen rose.
Energy stocks retreated 0.5 percent, despite higher oil prices.
The greenback also came under pressure after New York Federal Reserve President William Dudley cautioned it would "take some time" for United States inflation to reach the bank's two percent target, the latest warning price pressures remain muted.
Gold, another classic safe haven asset, was trading at around $1,285 per ounce, up more than two percent this week and near a nine-week high.
The rhetoric between the US and North Korea has continued to heat up, leading traders to look to safe havens such as gold and treasuries.More news: Neymar's debut for Paris Saint-Germain could be delayed again
The recent resilience of data on the USA economy has not dampened the latest climb, despite depressing prices earlier in the week as reports returned high employment figures ahead of further U.S. inflation information this week.
China's Shanghai Composite Index plunged 51.94 points or 1.6% to 3,209.80, as investors continued to book profits in cyclical sectors.
The Standard & Poor's 500 index fell 7 points, or 0.3 percent, to 2,467.
Australian shares fell to near three-week lows in a broad-based selloff.
Asian shares were slightly higher on Wednesday, with MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS up 0.1 percent in early trading. News Corp tumbled 5.4% and REA Group slumped 6% after disappointing full-year results.
Markets are now awaiting U.S. consumer price data for July, due later in the session.
Amid the hot rhetoric, US stocks sold off sharply on Thursday, with the S&P 500 falling more than 1 percent.
USA producer prices unexpectedly recorded their biggest drop in almost a year, and the number of Americans filing for unemployment benefits unexpectedly rose last week.
Shares of Snap (SNAP) are also seeing pre-market weakness after the parent of Snapchat reported a wider than expected second quarter loss on revenues that came in below expectations.