The FTSE 100 index of leading UK shares plunged by up to 112 points after Japanese prime minister Shinzo Abe warned of an “unprecedented” threat to his country and US president Donald Trump said “all options are on the table”.
It staged a partial recovery to close down 64.03 at 7337.4, while steeper losses were suffered across Europe’s leading markets including Germany and Italy, both down about 1.5 per cent.
Investors bought into safe haven assets such as gold, which rose 0.5 per cent to $1,316 an ounce, as the US dollar continued to slide against the euro at over $1.20, its lowest since January 2015, with the potential damage to US growth prospects from tropical storm Harvey adding to the pressure.
The European single currency also strengthened a further 0.3 per cent to about 93p against sterling amid concerns over the lack of progress in Brexit talks.
Joshua Mahony, market analyst at online trading group IG, said: “There seems to be a widespread consensus between financial markets today, with the losses evident across equity markets indicative of a wider shift out of risk in response to the latest North Korean missile.
“The decision to send a rocket over Japan raises tensions once more, with the unpredictable Pyongyang leadership meaning that tensions can flare up at any time.”
Neil Wilson, senior market analyst at ETX Capital, said: “What’s fascinating is how the eurozone is seen as safer politically and economically than the US. In Europe, political risk has diminished sharply, while growth looks very firm. The US looks shaky on both fronts.”
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