Japanese markets were closed for a holiday, but the tense mood dragged Asian shares lower and an MSCI index of stocks across the globe posted its largest weekly drop since the week before Donald Trump won the U.S. presidential election in November.
Global markets tumbled Wednesday as the US and North Korea ratcheted up their confrontational rhetoric, with the nuclear-armed North rolling out a plan to launch missiles towards the US Pacific territory of Guam. However, the 4-week average figure dropped by 1,000 to 241,000.
The pan-European FTSEurofirst 300 index lost 1.01 percent and MSCI's gauge of stocks across the globe shed 0.12 percent.
The pan-European FTSEurofirst 300 index lost 1.19 per cent.
The headline US CPI release was below consensus forecasts with a 0.1% increase for July compared with an expected 0.2% with the year-on-year rate at 1.7%.
"It looks like a technical correction, but if there's more bad news in the days to come, or if geopolitical tensions escalate, this short-term correction could become a major correction for stock markets here and globally", CMC Markets analyst Margaret Yang said.
US stocks edged higher in early trading Friday, recouping some of the ground they lost after the market's biggest single-day drop in almost three months.
The yen has also registered its biggest weekly gain since May against the dollar amid speculation that investors of Japan, as the biggest creditor nation, would repatriate their funds should a war break out.
Phipps said investors were reassured after Dallas Fed President Rob Kaplan's said on Friday that the Fed needs more evidence of progress toward its inflation goal before raising rates again.
"It reinforces market concerns that inflation is perhaps just not picking up in the way the Fed had been expecting", said Osborne.
CURRENCIES: The euro slipped 0.1 percent to $1.1176 while the dollar was steady at 109.20 yen. The yield - or interest rate - on a benchmark 10-year US Treasury bill dropped to 2.24%, while a 10-year German bund was yielding 0.43%. Like gold silver has also seen a rise, reaching a high of $17.24, before finishing 1.1% up at $17.08.
The Swiss franc CHF= and the yen notched big gains against the dollar on Wednesday after U.S. President Donald Trump warned North Korea that it would face "fire and fury" if it threatened the United States.