An Associated Press report that the USA and North Korea have been engaged in back channel talks (https://apnews.com/686ac7c761694b28b67793a1d8297145?link=mktw) for several months even as they exchange incendiary threats may also help to soothe jitters.
Gold got an extra boost after data showed United States consumer prices rose less than expected in July, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year.
"Much of the rally (in gold) is because of the increased safe-haven demand", said OCBC Bank analyst Barnabas Gan.
Emerging market stocks lost 1.27 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.47 per cent lower.
The Korean won also continued to fall, down 0.45 percent to 1,147.2.
"We're getting close towards very important support on the dollar/yen", said Steven Dooley, currency strategist for Western Union Business Solutions in Melbourne. In a tweet, President Donald Trump warned of military action "should North Korea act unwisely", noting that the U.S.is "locked and loaded".
The Dow Jones Industrial Average .DJI fell 204.69 points, or 0.93 percent, to close at 21,844.01, the S&P 500 .SPX lost 35.81 points, or 1.45 percent, to 2,438.21 and the Nasdaq Composite .IXIC dropped 135.46 points, or 2.13 percent, to 6,216.87.
NORTH KOREA: President Donald Trump warned North Korea of "fire and fury" this week in response to recent threats from Pyongyang, which said it was examining plans for attacking Guam, a USA territory in the Pacific with a military base. That lifted the year-on-year increase in the CPI to 1.7% from 1.6% in June.
In other energy futures trading, wholesale gasoline rose 1 cent to $1.61 a gallon, while heating oil was little changed at $1.63 a gallon.
Inflation has risen 1.7 percent over the past 12 months, suggesting that inflation pressures remain well under control.
They suggest the US and China, a North Korean ally, could work together to de-escalate the situation.
Korea's Samsung Electronics fell 2.8% Friday. They are looking for confirmation that the Fed is sticking with plans for a possible December interest rate hike.
J.C. Penney sank 16.6 percent after the struggling department store chain reported quarterly results that fell short of Wall Street's expectations. Brent crude was up 80 cents at $53.50 a barrel and U.S. crude was up 60 cents and back up to $50. Silver gained 1 cent to $17.07 an ounce.
USA crude rose 0.43 percent to $48.80 per barrel and Brent was last at $52.01, up 0.21 percent on the day.
Benchmark US 10-year notes last rose 6/32 in price to yield 2.1905 per cent, from 2.211 per cent late on Thursday. The euro rose to $1.1812 from $1.1774. While the German DAX Index closed just below the unchanged line, the UK's FTSE 100 Index and the French CAC 40 Index both tumbled by 1.1%.
Shares of Snapchat parent Snap Inc.(SNAP) slid 11% a day after the company's earnings missed forecasts (http://www.marketwatch.com/story/snap-ceos-promise-cant-overcome-declining-ad-rates-stock-heads-toward-new-lows-after-earnings-2017-08-10), and the social-messaging company disclosed that average ad prices fell in the second quarter. The fact that ended with a 1%-plus drop, however, might be good news.
There were falls of almost 2% on South Korea's Kospi and Hong Kong's Hang Seng, with markets in mainland China and Australia also down - taking their cues from sharp losses on Wall Street earlier.