Wall Street was poised for further losses at the opening bell, with Dow futures and the broader S&P 500 futures down 0.3 percent.
Yen is safest. These are some of the strategies analysts are recommending as the escalating threats between US and North Korea send investors fleeing. "And while risks remain elevated from a geopolitical perspective, valuations are not necessarily excessive, though full".
The US gains helped limit the losses in Europe.
Read:Few investors are excited about stocks.
Friday caps a week dogged by escalating tension between the USA and North Korea which culminated with President Donald Trump stating that his earlier threat to unleash "fire and fury" on North Korea "maybe wasn't tough enough".
Asian equities headed back into the red yesterday afternoon, wiping out a nascent recovery in the morning as spiralling tensions over North Korea lingered for a second day.
The influential financial stocks were among the biggest drags on the index, with Royal Bank of Canada down 1.5 percent to C$92.88, and Manulife Financial Corp falling 4.7 percent to C$24.43, its largest drop since early August a year ago.
The bigger surprise is that the cost to protect against declines in the kiwi against the US dollar for one month shot up to the most expensive levels since April.
"The North Korea situation is still unstable and investors are controlling risk and taking profit after recent gains", said Sam Chi Yung, a Hong Kong-based strategist at South China Financial Holdings.
The yen on Friday added to a strong weekly rally against the dollar of close to 1.5 per cent, hitting its highest versus the greenback in nearly four months, at 108.73 yen.More news: Jeremie Boga set to start for Chelsea against Burnley
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Analysts said yields, which move inversely to prices, could fall further if the geopolitical tensions continue to rise - even if central bankers in the United States continue to talk of raising interest rates or scaling back stimulus programmes.
Subdued U.S. inflation has stirred doubts about the chances of another Fed interest rate hike this year, which have weighed on the dollar.
Outside the political arena, declines in a pair of technology stocks added to the cautious tone on the day.
The index was down 1.44% or 108.12 points to close at 7389.94 on Thursday in its worst performance for four months. The Nasdaq composite lost 20 points, or 0.3 percent, to 6,349.
"That reset is being triggered by North Korea geopolitical concern and stretched valuations", said Peter Kenny, senior market strategist at Global Markets Advisory Group in NY.
Data from the U.S. Commodity Futures Trading Commission released last week showed that currency speculators still held a large net short position in the yen during the week ended August 1, although somewhat smaller than the levels seen a couple of weeks earlier, when their bearish bets against the yen grew to the largest since January 2014.
The latest tensions began after US President Donald Trump on Tuesday warned North Korea that it would face "fire and fury" if it threatened the United States.
Shares rose more than 1.3% or 4.9p to 388.5p.
J.C. Penney Co. (JCP) slumped 17% after it reported a wider-than-expected second-quarter loss (http://www.marketwatch.com/story/jc-penney-shares-sink-after-losses-exceed-expectations-2017-08-11).