European and U.S. equity-index futures dropped with stocks in Asia as North Korea ratcheted up its threats against the U.S. by suggesting retaliation may include testing a hydrogen bomb in the Pacific. Safe havens including the yen and gold advanced.

After a flat start to Friday’s Asia session, equities declined in most of the region. Hong Kong shares slid as S&P Global Ratings cut the city’s sovereign rating a day after it downgraded China. Bond yields retreated after Yonhap News cited a North Korean official saying the “highest level of hard-line” countermeasures against the U.S. could refer to a hydrogen-bomb in the Pacific Ocean. North Korea’s nuclear tests up to now have taken place on its own soil. The euro and Swiss franc advanced while the rout in base metals deepened.

The fresh threats diverted attention from the monetary-policy decisions that have dominated markets’ focus this week. Investors are keeping an eye on speeches by Federal Reserve officials that may offer further clues to the central bank’s thinking after bets for higher rates by year-end were raised following this week’s policy meeting.

Attention also turns to events in Europe with U.K. Prime Minister Theresa May set to give a key speech on her Brexit strategy on Friday in Florence. Germany goes to the polls on Sunday, with Chancellor Angela Merkel expected to secure a fourth term, although she may not win an outright majority.

What to watch out as the week comes to an end:

  • Bank Indonesia will probably keep its benchmark rate at 4.5 percent.
  • U.S. September preliminary Markit PMI data, which are predicted to show an acceleration in manufacturing and a slight cooling in services growth.
  • Euro-area PMIs on Friday will probably provide additional evidence that growth moderated in the third quarter, Bloomberg Intelligence said.
  • New Zealand heads to the polls on Saturday.

Here are the main moves in markets:

Stocks

  • Japan’s Topix index fell 0.3 percent at the close in Tokyo and South Korea’s Kospi index slid 0.7 percent. Australia’s S&P/ASX 200 Index added 0.5 percent.
  • Hong Kong’s Hang Seng Index lost 0.8 percent and the Shanghai Composite Index dropped 0.2 percent.
  • Taiwan’s Taiex index fell 1.2 percent, the biggest slide in Asia. Hon Hai Precision Industry Co. is heading for its biggest weekly loss since October 2014, with some analysts saying early sales of Apple’s new iPhone 8 are slower than for previous models.
  • Futures on the S&P 500 Index retreated 0.3 percent. The underlying benchmark fell 0.3 percent on Thursday.
  • Euro Stoxx 50 futures contracts lost 0.3 percent.
  • The MSCI Asia Pacific Index declined 0.3 percent.

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2 percent after touching the highest in more than two weeks on Thursday.
  • The Japanese yen gained 0.5 percent to 111.97 per dollar, advancing the most in more than two weeks.
  • The Australian dollar was little changed at 79.38 U.S. cents after tumbling 1.3 percent on Thursday.
  • The euro added 0.2 percent to $1.1964 and the Swiss franc climbed 0.2 percent to 0.9686 per dollar.

Bonds

  • The yield on 10-year Treasuries fell two basis points to 2.25 percent, ending five days of rising yields.
  • Australian 10-year bond yields dropped four basis points to 2.79 percent.
  • German 10-year bund yields were steady at 0.45 percent.

Commodities

  • West Texas Intermediate crude rose 0.3 percent to $50.69 a barrel.
  • Gold rose 0.4 percent to $1,296.79 an ounce.
  • Iron ore futures on SGX AsiaClear in Singapore dropped 0.9 percent to $62.27 a metric ton, adding to a 6.3 percent plunge on Thursday.
  • Copper, aluminum, zinc, nickel and tin all fell on the London Metals Exchange.

Source: Bloomberg