Just hours before North Korea's warning, US President Donald Trump warned Pyongyang that if it continued to threaten Washington, the Communist nation would face "fire and fury" the world has never seen.
Safe-haven assets gained. Gold rose 1.2 percent, while the Swiss franc was on track to post its biggest single day rise in about two-and-a-half years. Mainland markets also traded below the flat line, with the Shanghai Composite slipping 0.18% and the Shenzhen Composite lower by 0.14%.
While European stocks have seen robust inflows in the wake of the French elections, their performance have lagged their US rivals since mid June. The S&P 500 declined 1.45% to end at 2,438.21, with information technology and financials leading the way lower.
In Europe, the Stoxx 600 Index finished the day with a decline of 1 percent from the previous close.
Sterling was little changed at US$1.30 and near a 2-1/2-week low, as investors looked to key data due next week for clues on the health of the British economy as the country prepares to leave the European Union.
The VIX rose further on Wednesday, rising as far as 12.11, its highest in nearly a month.
Memorial service held for Justine Damond shot by Minneapolis police officer
Investigators have said Officer Mohamed Noor shot Damond after she called 911 to report a possible sexual assault near her home. Minneapolis police officers are now required to have their body cameras on when they respond to calls and make traffic stops.
The sabre rattling sent tremors throughout stock markets globally as investors responded to rising geopolitical tensions by selling off stocks and moving to traditional safe havens such as gold and U.S. government bonds.
"It's just a classic risk-off day", said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in NY.
The RBNZ kept interest rates unchanged at a record low of 1.75 percent on Thursday.
However, shares of Dean Foods tumbled, trading 20.1 per cent weaker at US$11.96 as of 2.24pm in NY, after the U.S. dairy processor posted quarterly results that fell short of expectations and downgraded its full-year forecast amid "a challenging and rapidly evolving retail environment". Nvidia fell $6.08, or 3.5 percent, to $166.03. Australia's S&P/ASX 200 edged down almost 0.1 percent to 5,760.90, while South Korea's Kospi fell 0.5 percent to 2,357.84.
Benchmark U.S. crude rose 39 cents to settle at $49.56 a barrel on the New York Mercantile Exchange. The yield on the 10-year Treasury note slipped to 2.21 percent from 2.25 percent late Wednesday.
"The markets are looking for direction after Wednesday's sharp moves and geopolitical concerns will dominate investor mindsets in the coming days", said Esther Maria Reichelt, an FX strategist at Commerzbank in Frankfurt.
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