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Shares rose on Tuesday, while the Japanese yen and gold dropped after North Korea's leader delayed a decision on firing missiles towards Guam, easing tensions and prompting investors to buy riskier assets.
Wall Street looked set to open 0.2-0.3 per cent higher, according to index futures, after shares rose in Europe and Asia.
The pan-European STOXX 600 index rose 0.1 per cent, with financials among the gainers and energy stocks losing ground as oil prices fell.
North Korea's leader Kim Jong Un received a report from his army on its plans to fire missiles towards the US Pacific territory of Guam and said he would watch the actions of the United States for a while longer before making a decision, the North's official news agency said on Tuesday.
"There is a more relaxed attitude being taken towards the Korean situation in markets. With the report that North Korea has put its plans on hold, there is a sense of stepping back from the brink," Rabobank analyst Lyn Graham-Taylor said.
The STOXX 600 index had already risen 1.1 per cent on Monday after US officials played down prospects of the standoff between North Korea and the United States leading to conflict.
The S&P 500 rose 1.0 per cent on Monday in its biggest daily percentage rise since April.
MSCI's broadest index of Asia-Pacific shares outside Japan gave up most of the day's gains but remained in positive territory. Australian stocks closed up 0.5 per cent. South Korea's markets were closed for a holiday.
Japan's Nikkei stock index ended 1.1 per cent higher, boosted by the weaker yen, a day after skidding 1 per cent to its lowest since early May.
Assets that generally do well in time of market or geopolitical turbulence were among fallers on Tuesday.
The yen, which tends to gain on expectations that Japanese investors will repatriate assets in a crisis, fell 0.7 per cent to 110.38 per dollar.
The Swiss franc, which gained 1.1 per cent on Aug. 9 as the war of words over the Korean peninsula intensified, held steady at 0.9719 per dollar. This followed a 1.1 percent fall on Monday.
The euro was down 0.3 per cent at $1.1749, helping to push the dollar index, which measures the greenback against a basket of currencies, up 0.3 per cent.
Comments from New York Federal Reserve President William Dudley also supported the dollar. He told the Associated Press he would favour a third increase in Fed interest rates this year if the economy developed as he expected..
Sterling hit a five-week low of $1.2867, falling below $1.29 for the first time since July 13, after UK inflation undershot expectations, making a rise in Bank of England interest rates less likely.
In debt markets, yields on low-risk German and US government bonds rose.
German 10-year yields, the benchmark for euro zone borrowing costs, rose 3.5 basis points to 0.44 per cent, having fallen to as low as 0.38 per cent on Friday.
US 10-year Treasury yields rose 4 bps to 2.25 percent, up from a six-week low of 2.18 per cent touched on Friday.
Gold, viewed as a safe haven for investors in troubled times, fell 0.6 per cent to $1,275 an ounce.
Oil prices steadied somewhat after falling more than 2.5 per cent on Monday to its lowest in about three weeks on the strength of the dollar and reduced refining in China.
Brent crude, the international benchmark, was last down 30 cents at $50.43 a barrel.
