LONDON, Aug 11 (Reuters) - The damage inflicted on world stocks this week by the escalating war of words over North Korea topped $1 trillion on Friday, as investors again took cover in the yen, the Swiss franc, gold and government bonds.
Japanese markets were closed for a holiday, but the tense mood dragged Asian shares lower and an MSCI index of stocks across the globe .MIWD00000PUS posted its largest weekly drop since the week before Donald Trump won the US presidential election in November.
The rise in geopolitical tensions this week, which heightened after U.S. President Donald Trump on Tuesday warned North Korea that it would face "fire and fury" if it threatened the United States, has drawn investor attention away from second-quarter corporate earnings season, which is winding down.
"There's not a great incentive to buy big", said Lerner of SunTrust Advisory.
The North Korea situation isn't the only thing weighing on stocks.
United States markets held steady in trade on Friday, with the Dow Jones up 0.2%.
The pan-European FTSEurofirst 300 index lost 1.01 percent and MSCI's gauge of stocks across the globe shed 0.12 percent.
The broad-based S&P 500 was hit even harder, dropping 1.5 percent to close at 2,438.22, while the tech-rich Nasdaq Composite Index lost 2.2 percent 6,216.87.
South Korea's KOSPI fell 1.7 percent on Friday to its lowest level since May 24, but its losses for the week are a relatively modest 3.2 percent.
It was 0.2 percent lower at 1.1310 francs, compared with highs of 1.1537 francs hit a week ago. "Pretty remarkable, perhaps even extraordinary, considering", said Tim Ash, strategist at fund manager BlueBay.
Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a sell-off, and the tensions over North Korea have proved the trigger.
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Futures lower as North Korea tensions linger
All 11 major S&P sectors were lower and the consumer discretionary index was the biggest loser with a 1 percent drop. Priceline sank 7.8 percent as it projected third-quarter earnings below Wall Street analyst expectations.
The yen on Friday added to a strong weekly rally against the dollar of close to 1.5 percent, hitting its highest versus the greenback in nearly four months, at 108.73 yen. "The yen is the big story really".
US crude was down 0.9 percent at $48.16 per barrel, on track for a weekly loss of 2.9 percent.
"A soft inflation figure below market consensus, is likely to quell expectations of higher U.S. interest rates, ultimately pressuring the dollar".
Despite the drop, analysts said the market seemed to be a bit skeptical that the North Korea situation would grow into a major crisis, noting that the losses were still not that deep.
Housebuilders Persimmon and Barratt Developments were among the biggest gainers of the day, up 1.58% and 1.02% respectively.
Sterling was sitting at 1.287 against the American currency, while the euro was at 1.17 during Friday trading, as relations between Kim Jong-un's rogue state and the U.S. president continued to deteriorate.
Benchmark 10-year notes US10YT=RR last rose 5/32 in price to yield 2.2255 percent, from 2.242 percent late on Wednesday.
The 30-year bond was last up 4/32 in price to yield 2.7871 percent, from 2.794 percent late on Thursday.
Spot gold added 0.7 percent to $1,286.00 an ounce. It soared over 2 percent in the previous two sessions, and is set for a weekly gain of 2.25 percent.
Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in USA crude inventories, leaving prices volatile.
Amid the hot rhetoric, US stocks sold off sharply on Thursday, with the S&P 500 falling more than 1 percent.