Reuters data show a 28 percent chance for a hike after the Fed's December meeting.
US stock futures ESc1 were marginally softer on Friday. Trump is issuing a new warning over the North's development of nuclear weapons. But Michael said the overall market was still expected to saw-tooth its way higher due in part to a batch of better-than-expected earnings and low interest rates, despite the shift toward raising rates.
"U.S. markets had previously been becalmed amidst the Goldilocks scenario of strong profit growth, low interest rates and full valuations".
The pound has slipped by 0.1 percent versus the dollar, but has gained 0.1 percent against the euro.
The pan-European FTSEurofirst 300 index lost 1.19 percent.
The UK blue-chip index closed 113 points, or 1.5%, lower at 7,385, steadily losing ground as the trading session wore on.
Overnight, US hedge fund manager Ray Dalio recommended, in a post on his Linkedin page, to shift assets into gold because "prospective risks are now rising and do not appear appropriately priced in" because of a backward look at risk, high corporate leveraging and because past risks have been low.
United Kingdom stocks finished sharply lower on Friday, as escalating tensions between the USA and North Korea helped drive a global selloff and left British blue-chips with their worst weekly performance in almost four months. The FTSE 250 ended down 0.8%, or 154.63 points, at 19,544.79, and down 2.1% for the week as a whole.
The market was also waiting for data that would offer clues about the extent to which the strengthening U.S. labour market is spilling over into inflation.
"If the data continues to come in on the softer side, the market might start to price the Fed staying on hold this year", said Sireen Harajli, FX strategist at Mizuho in NY. Hong Kong's Hang Seng Index plunged by 2 percent, while South Korea's Kospi Index slumped by 1.7 percent.
Sterling was last trading at $1.3013, up 0.30 percent on the day.
"The latest threats over North Korea have finally escalated to the point where market has been obliged to react", Ric Spooner, chief market analyst at CMC Markets, wrote in a note.
Economic data showed US worker productivity rose more than expected in the second quarter but the trend remained weak.
Gold rose to its highest level in nearly two months, while the Swiss franc increased by more than 1% against the USA dollar and saw its biggest one-day gain against the euro in more than two and a half years. Brent crude, used to price global oils, gained 40 cents to $52.54 in London.
ENERGY: Benchmark U.S. crude added 28 cents to $49.45 per barrel in electronic trading on the New York Mercantile Exchange.
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