The remarks, following North Korea's earlier revelation of a plan to launch a salvo of ballistic missiles toward the U.S. Pacific territory of Guam, gave investors a reason to pocket profit in the sectors, such as technology, that have been the biggest gainers in recent months, analysts said.
The dollar index (.DXY), which measures the USA currency against a basket of other major currencies, fell 0.14 percent. Australia's S&P/ASX 200 dropped 1.1 percent to 5,696.80.
A widely followed measure of market anxiety jumped late in the day to close at its highest in almost a month.
Gold prices held early gains in Asia on Thursday with the market alert for more of the war of words between North Korea and Washington stoking geopolitical tension in the region.
The decline in equity markets and a dip in USA bond yields triggered fresh demand for precious metals and gold pushed to fresh 2-month highs around $1,288.
But losses soon resumed, with Tokyo edging down as the Nikkei again came under pressure from the strength of the safe-haven yen, which hit eight-week highs Wednesday against the dollar.
SEOUL - A North Korean defected to South Korea on Friday after crossing the western sea border, the South's Joint Chiefs of Staff (JCS) said.
USA stock futures were marginally softer on Friday.
Fundamentally, Gold has experienced a small pullback following Friday's stronger U.S. Jobs Numbers and renewed capital flows into the greenback.
Trump's second warning, however, has shaken markets that have been largely resilient this year, swatting away a slew of risks.
For now, that's what I think will happen, but will be quick to change my opinion if we see a distinct reversal pattern or a break in market structure. It was at its highest level in more than seven months.
Politics lifted USA defense stocks.
News that USA producer prices unexpectedly fell in July earlier helped send the U.S. dollar lower. The US currency was down 0.3% at 109.94 yen, following a retreat to 109.740, its weakest since June 15.
Japan is the world's biggest creditor country and there is an assumption that investors there will repatriate funds in a crisis.
"Trump's response was aggressive and that's why the market turned lower", said Ken Polcari, Director of the NYSE floor division at O'Neil Securities. "So we're not going to get to a year-over-year number of 2-percent until some of these very low readings drop out of the statistics 6 to 10 months from now".
Kohl's stock dropped almost six percent despite better than expected earnings.
U.S. producer prices Thursday disappointed, as traders await consumer price inflation later Friday.
Gold prices firmed overnight to close around the $1260.75 an ounce mark as the precious metal reacted to a range of increased risk emanating from renewed tension on the Korean Peninsula.
In the NY session, Canada new housing price index for June, U.S. weekly jobless claims for the week ended August 5 and U.S. PPI for July are slated for release. U.S. gold futures for December delivery rose 0.3 per cent to $1,294.10 per ounce. Viacom slid 93 cents, or 3 percent, to $29.84. Regeneron Pharmaceuticals led the pack, adding $4.47, or 1 percent, to $474.15.
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