Stocks around the world fell sharply on Thursday and investors moved into the yen, gold and other safe-haven assets amid more aggressive talk between the United States and North Korea.
The Japanese yen hit an eight-week high against the USA dollar, while spot gold also reached a two-month high.
U.S. President Donald Trump warned North Korea on Thursday not to strike Guam or U.S. allies, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.
"There's not a great incentive to buy big", said Lerner of SunTrust Advisory.
"We do just not know what happens next with the North Korea situation", said BNY Mellon FX strategist Neil Mellor.
The Dow Jones Industrial Average fell 204.69 points, or 0.93 percent, to close at 21,844.01, the S&P 500 lost 35.81 points, or 1.45 percent, to 2,438.21 and the Nasdaq Composite dropped 135.46 points, or 2.13 percent, to 6,216.87.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.77 percent, on track for its third straight day of declines as it pulled further back from all-time highs.
The dollar-denominated RTS index was down 1.5 percent at 1,013 points as of 0834 GMT, taking its year-to-date loss to 12 percent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.37 percent lower.
The euro, which hit its highest since the start of 2015 on August 2, dipped 0.2 percent to $1.1753 in early trade in Europe.
Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a selloff, and the tensions over North Korea have proved to be the trigger. "Pretty remarkable, perhaps even extraordinary, considering", said Tim Ash, strategist at fund manager BlueBay.
The yen on Friday added to a strong weekly rally against the dollar of close to 1.5 percent, hitting its highest versus the greenback in nearly four months, at 108.73 yen.
The yen tends to benefit during times of geopolitical or financial stress as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis materialize.
The dollar index .DXY , which measures against a basket of currencies, fell 0.05 percent.
"A soft inflation figure below market consensus, is likely to quell expectations of higher USA interest rates, ultimately pressuring the dollar".
On the currency markets, the pound was up 0.03% against the dollar at $1.2981 but down 0.23% against the euro at 1.0999 euros.
"More likely than anything else, the price action was a function of an overextended US equity market that has been in need for a healthy correction off record highs", LMAX Exchange analysts said in a morning note.
Housebuilders Persimmon and Barratt Developments were among the biggest gainers of the day, up 1.58% and 1.02% respectively.
Benchmark 10-year notes were last up 12/32 in price to yield 2.201 percent, from 2.242 percent late on Wednesday.
The 30-year bond was last up 4/32 in price to yield 2.7871 percent, from 2.794 percent late on Thursday.
After touching a more than two-month high, spot gold last added 0.3 percent to $1,290.00 an ounce. It soared over 2 percent in the previous two sessions, and is set for a weekly gain of 2.25 percent.