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Harsh Rhetoric Between North Korea and Trump Worries Investors

A man looks at an electronic board showing Japan's Nikkei average outside a brokerage at a business district in Tokyo, Aug. 9, 2017.

The exchange of threats and harsh rhetoric between North Korea and Donald Trump has rattled many investors. Stock prices fell in Asia, Europe and the United States, while demand rose for safe-haven investments like gold.

Wednesday, key stock indexes in Hong Kong, Germany and France were down by one percent or more. U.S. stocks were off as much as four-tenths of a percentage point during Wednesday's trading, but recovered some ground by the close. Before Tuesday's angry exchange of words, U.S. stocks had been setting a series of record highs.

Demand for gold, a traditional way of protecting assets in troubled times, drove up the price for the precious metal by about one percent in Wednesday's trading. Oil prices also posted gains.

Analyst Oliver Roth of ODDO Seydler Bank told Reuters that "this crisis scenario" is the most significant issue putting pressure on German stocks.

The Mansfield Foundation's Frank Jannuzi said, "Intemperate words that sow uncertainty are never helpful."

Jannuzi, a former intelligence analyst and congressional adviser who has been studying East Asia for years, says the danger is growing more slowly than the rhetoric might indicate. He is concerned, however, that the U.S. has not yet put an ambassador in South Korea or senior diplomats in key posts, which he says increases the danger that misunderstanding could cause the two sides to blunder into war.

South Korea is home to more than 50 million people, and major companies like Samsung and Hyundai. World Bank data show South Korea has a $1.4 trillion economy, which is nearly two percent of global economic activity.