Tillerson calms North Korea tensions after Trump rattles markets

[HONG KONG] US Secretary of State Rex Tillerson downplayed the threat of an imminent strike on North Korea a day after President Donald Trump warned he could unleash "fire and fury" against Kim Jong Un's regime.

"Americans should sleep well at night, have no concerns about this particular rhetoric of the last few days," Mr Tillerson told reporters on his plane after a stop in South-east Asia.

"The president, again, as commander in chief, he felt it necessary to issue a very strong statement directed at North Korea."

Mr Trump's comments reverberated around the world, sparking a sell-off in global markets and prompting a wave of criticism in Washington.

Senator John McCain said he wasn't sure Mr Trump was ready to act, while Representative Eliot Engel, the top Democrat on the House Foreign Affairs committee, said the comments "undermined American credibility by drawing an absurd red line."

Mr Tillerson said that the US is engaged in a very active diplomatic effort to halt Kim Jong Un's pursuit of a nuclear weapon that could strike the US mainland.

He said that North Korea should be looking for talks "with the right expectation of what those talks will be about."

"My first order as President was to renovate and modernise our nuclear arsenal. It is now far stronger and more powerful than ever before," Mr Trump posted on Twitter on Wednesday morning, in his first comment on the topic since the "fire and fury" threat.

"Hopefully we will never have to use this power, but there will never be a time that we are not the most powerful nation in the world!"

Earlier in the day, Mr Trump retweeted several reports from Fox News on the North Korea tensions, including this: "US Air Force jets take off from Guam for training, ensuring they can 'fight tonight'."

Japan and South Korea, the two countries most at risk from a US attack on North Korea, largely brushed off Mr Trump's threats.

Yonhap News Agency cited an unidentified official at the presidential office in Seoul saying there's no "imminent crisis".

In a statement on Wednesday, China urged all sides to avoid escalating tensions and to return to dialogue.

A risk-off tone gripped markets on Wednesday, with gold, the Japanese yen and bonds rising as tension grew. European stocks slumped following declines across most of Asia.

BLOOMBERG