Trump's war talk blamed for stock market drop

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But financial markets were jolted out of their period of calm this week after tensions between North Korea and the US escalated, and several earnings releases disappointed.

"First, the ongoing hostility with North Korea is not only likely to keep the MSCI Korea Index under pressure, but could also weigh a little on equities elsewhere in the region", Capital Economics said.

The Swiss franc CHF= and the yen notched big gains against the dollar on Wednesday after U.S. President Donald Trump warned North Korea that it would face "fire and fury" if it threatened the United States. A safe-haven surge for the yen pressured Japan's Nikkei to a drop of 1.3%, while South Korea followed suit with a 1.1% slump. Such a launch so close to American territory would force the United States to try to intercept the missiles, which could lead to further escalation. It has air and naval bases, as well as missile-defence launchers on the island.

Canada's benchmark stock index fell on Wednesday as heightened tensions between North Korea and the United States drove investors away from higher-risk assets and toward safe havens, such as gold.

Will the USA benefit from a nuclear war?

But Trump's comments sparked widespread unease, with many observers noting they sounded more like North Korea's trademark rhetoric than the usually cautious diplomatic language employed by USA presidents.

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"There had not been any discussions about escalating the rhetoric in response to Kim's statements or about the possible effects of doing that", the official said.

The unease about the relationship between the US and its allies and North Korea is more prominent in other markets, several market strategists noted.

Trump, enjoying a working holiday at his New Jersey golf course, went on to boast that the U.S. nuclear arsenal was "more powerful than ever". "You've got to be sure you can do what you say you're going to do", McCain said in a radio interview. Secretary of State Rex Tillerson later insisted the US isn't signalling it's about to mete out a military response despite threats from North Korea suggesting it could attack Guam, a USA island territory in the Pacific.

The verbal exchanges raised the stakes in the standoff over the North's nuclear and missile program, which has generated the most serious crisis on the divided Korean peninsula in years.

"North Korea's provocative actions, including on this occasion, are a clear threat to the region and the global community and can absolutely not be tolerated", he told reporters. Speculative buying is expected to increase if the situation escalates to military action. It says its ICBMs are a legitimate means of defense against perceived US hostility, including joint military drills with South Korea.

Ralph Lauren Corp. shot up 13.3 per cent after reporting a net income of US$59.5 million (S$81 million) in earnings through July 1, up from a loss of US$22.3 million in the year-ago period. Tens of thousands of USA troops remain stationed in South Korea and in nearby Japan.

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