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Nokor warning jolts world markets

President Donald Trump’s threat to hit North Korea with “fire and fury” jolted markets from New York to Seoul even as US lawmakers questioned the president’s willingness to back up the heated rhetoric.

“North Korea best not make any more threats to the United States,” Trump told reporters in Bedminster, New Jersey, on Tuesday. “They will be met with fire, fury and, frankly, power the likes of which this world has never seen before.”

Trump’s remarks came as North Korea—reacting to new United Nations sanctions against its nuclear weapons program—warned the U.S. would “pay dearly” and said it was examining plans to fire a missile toward an American military base on Guam. The exchange followed a Washington Post report, citing a Defense Intelligence Agency analysis, that Pyongyang successfully developed a nuclear warhead to use on its missiles.

A trader works on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on August 8, 2017 in New York. Wall Street stocks fell Tuesday amid rising tensions between the US and North Korea, bringing the Dow’s streak of nine straight records to an end. Stocks had pushed into positive territory, but dropped in the last hour of trading after US President Donald Trump warned Pyongyang it will face “fire and fury” if it continues to threaten the US. AFP

“He has been very threatening, beyond a normal statement,” Trump said of Kim.

While global powers and financial markets have long been accustomed to over-the-top rhetoric from North Korea, the US has traditionally taken a more diplomatic stance. Trump’s suggestion he might meet Kim’s threats with action startled markets and prompted a renewed focus on the narrowing list of military and economic options available.

The S&P 500 Index fell to session lows Tuesday, and the CBOE Volatility Index jumped 11 percent after Trump spoke. The comments jolted markets from a summer slumber, with US assets largely little changed for most of the session.

South Korea’s benchmark Kospi fell 1.1 percent to the lowest since June 21, while the won fell the most in three weeks. Japan’s Topix index had the biggest slide in almost three months.

Whether the president first consulted with allies, the Pentagon or other government agencies was unknown. It also wasn’t clear whether Trump’s “fire and fury” threat described a conventional strike or one involving nuclear weapons.

The Defense Department offered no explanation. “We remain prepared to defend ourselves and our allies and to use the full range of capabilities at our disposal against the growing threat from North Korea,” Pentagon spokesman Johnny Michael said in an email. North Korea has routinely used bombastic rhetoric to threaten the US, including military bases in Guam, Hawaii, Japan and South Korea.

South Korea said on Wednesday it was monitoring for any additional moves by North Korea, and would continue to push for peace. An official at the presidential office in Seoul told reporters that there’s no “imminent crisis,” Yonhap News Agency reported.

“We are working to fundamentally resolve the North Korean nuclear and missile issues at the earliest date possible, and are working with a belief that the possibility is very high,” Yonhap reported, without identifying the official.

Japan welcomed the US’s decision to keep all options on the table, Chief Cabinet Secretary Yoshihide Suga told reporters in Tokyo.

North Korea’s reported progress on miniaturizing nuclear warheads―coupled with two test flights of intercontinental ballistic missiles in July―are raising pressure on Trump. Before taking office, he pledged to prevent North Korea from developing an ICBM: “It won’t happen,” he wrote on Twitter.

Topics: North Korea , President Donald Trump , United States , world markets , United Nations sanctions , nuclear weapons
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