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Australia shares slump as US, North Korea tensions ramp up; NZ down

[BENGALURU] Australian shares dropped to a near three-week low on Friday, as investors fled to safer assets amid the escalating rhetoric between North Korea and the United States.

The S&P/ASX 200 index fell 62.33 points, or 1.1 per cent, to 5,698.6 at 0153 GMT, and was set for its third weekly loss in four.

Tensions in the Korean peninsula escalated further after US President Donald Trump warned North Korea again on Thursday not to strike Guam or US allies, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.

Markets had shrugged off Mr Trump's "fire and fury" statement at first, but now that he has come back and reinforced that point of view, "people are becoming a little more concerned," said Ric Spooner, chief market strategist at CMC Markets.

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Ultimately, the rhetoric might be followed by action, and this possibility is pushing financial markets down, he added.

On the day, National Australia Bank fell nearly 1.8 per cent to a one-week low despite a 5 per cent rise in its third-quarter cash profit. "Banks often get sold when markets are concerned about geopolitical risks," Mr Spooner added.

Other banks in the "Big Four" followed suit, with Australia's top mortgage lender Commonwealth Bank of Australia slipping 1.4 per cent to its lowest in over eight weeks.

CBA has been under the hammer recently on alleged breaches of money-laundering and terror financing laws. On Friday, Australia's corporate regulator added to the bank's woes after it said it was conducting an investigation into these alleged violations.

Sentiment in the banking sector was also dented by comments by Australia's central bank, which said it aims to keep interest rates at record lows for a while, with any tightening "quite some time away" and likely to be gradual as households try to whittle down a mountain of debt.

The global tensions spilled over into material stocks as well, despite a strong rally in metal prices.

Large-cap miners BHP Billiton and Rio Tinto fell 1.8 per cent and 2.3 per cent, respectively.

The flight from riskier assets helped gold stocks, as spot gold prices rose this week. Newcrest Mining rose as much as 3.7 per cent to a 12-week high, and was on track for its fourth straight session of gains.

New Zealand's benchmark index S&P/NZX 50 fell 72.64 points, or 0.9 per cent, to 7,717.07 at 0153 GMT. The index posted its biggest intraday per centage drop since March 20.

Fisher & Paykel Healthcare Corporation Ltd and Ryman Healthcare Ltd declined 2.8 per cent and 1.2 per cent, respectively.