Wall St stock rally could be derailed by US-N Korea tension

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The dollar weakened after news that USA producer prices unexpectedly fell in July, recording their biggest drop in almost a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.

The euro, which hit its highest since the start of 2015 on August 2, dipped 0.1 percent to $1.1761 in morning trade in Europe.

On Thursday, the CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the U.S. presidential election.

Safe-haven assets gained following the rising geopolitical tensions.

The benchmark S&P 500 index tumbled more than 1% on Thursday, only the third time this year it has fallen that much, while the Nasdaq shed more than 2%. On Thursday, the Dow Jones Industrial Average, which has been steadily hitting records, posted its biggest decline since May.

Trump was responding to North Korea's claim it was completing plans to fire four intermediate-range missiles over Japan to land near the U.S. Pacific territory of Guam.

The Canadian dollar dropped 0.2 cents to 78.69 cents U.S. Friday morning.

But despite the largest percentage drop in over a month on a global equities index, USA equities ended only slightly lower as healthy corporate earnings and a recent string of strong economic data enticed investors into beaten-down stocks.

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Entering Friday's session, the Dow was on track to post its worst weekly performance since March 24, while the S&P 500 stared at its biggest weekly loss since the week before the USA election.

The sell-off is likely to extend into the European session today, with financial spreadbetter CMC Markets expecting Germany's DAX and France's CAC 40 to open down about 0.7% each and Britain's FTSE 100 to start 0.55% lower.

More than 430 stocks from all U.S. exchanges hit their lowest levels in 52 weeks or more on Thursday, the most for any session since mid-November right after Trump was elected. "The stock market looks a little vulnerable".

Trump, whose threat this week to bring "fire and fury" was dismissed by North Korea, said Thursday that statement might not have been "tough enough".

But the prospect of hefty losses on Wall Street stocks was averted when U.S. secretary of state Rex Tillerson said there was "no imminent threat of war" and that Americans could "sleep well at night".

Auto parts maker Hyundai Mobis Co. was up 1.78 percent to 257,500 won, and No. 2 chipmaker SK hynix Inc. rose 0.31 percent to 64,400 won.

Heavyweight Apple could have provided some support for trading with a 0.8 percent rise in prices.

S&P 500 e-minis were down 4.5 points, or 0.18 percent, with 209,543 contracts traded.

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