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By Nichola Saminather
SINGAPORE (Reuters) - Australian stock futures slumped early on Friday and other Asian markets looked set to follow as tensions ramped up between the U.S. and North Korea, sending investors into less risky assets such as gold, the yen and U.S. government bonds.
The MSCI World index <.MIWD00000PUS> dropped 1.1 percent overnight in its third straight day of declines and its biggest one-day slide since May 17, as U.S. President Donald Trump stepped up his rhetoric against North Korea.
Australian stock futures
U.S. stock futures
Overnight, Wall Street closed sharply lower after Trump, with fiery rhetoric, warned Pyongyang against attacking Guam or U.S. allies after it disclosed plans to fire missiles over Japan to land near the U.S. Pacific territory.
Trump took specific aim at North Korean leader Kim Jong Un, saying, he had "disrespected our country greatly," and would not be "getting away with it."
"The latest threats over North Korea have finally escalated to the point where market has been obliged to react," Ric Spooner, chief market analyst at CMC Markets, wrote in a note.
"U.S. markets had previously been becalmed amidst the Goldilocks scenario of strong profit growth, low interest rates and full valuations. Difficult to assess political risk is now intruding on this scenario."
The dollar extended losses against the yen to hit a new two-month low. It was trading at 109.16 yen
Japan is the world's biggest creditor country and there is an assumption that investors there will repatriate funds in a crisis.
Weakness in U.S. Treasury yields may also be supporting the yen, some analysts said.
U.S. Treasury yields
The dollar was little changed against a basket of major currencies <.DXY>.
U.S. crude oil crude futures
(Reporting by Nichola Saminather; Editing by Kim Coghill)