North Korea warns of nuclear war; Trump says weapons 'locked and loaded'

Trump kept up the war of words on Twitter shortly after the North Korean state news agency, KCNA, put out a statement blaming him for the escalated tensions.

"Trump is driving the situation on the Korean peninsula to the brink of a nuclear war, making such outcries as 'the U.S. will not rule out a war against the DPRK,'" KCNA said.

Trump, who is at his Bedminster, New Jersey, golf resort on a working vacation, described American military readiness in stark terms.

"Military solutions are now fully in place, locked and loaded, should North Korea act unwisely," he wrote on Twitter. "Hopefully Kim Jong Un will find another path!"

The U.S. president maintained pressure on the North a day after saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.

U.S. Defense Secretary James Mattis tempered Trump's harsh words later on Thursday by telling reporters the United States still preferred a diplomatic approach to the North Korean threat. A war would be "catastrophic," he said.

Asked if the United States was ready if North Korea committed a hostile act, he said: "We are ready."

Tension in the region has risen since the reclusive North staged two nuclear bomb tests last year and launched two intercontinental ballistic missile tests in July in defiance of world powers. Trump has said he would not allow Pyongyang to develop a nuclear weapon capable of hitting the United States.

As incendiary rhetoric in Pyongyang and Washington flared this week, a Chinese state-run newspaper said on Friday that China should remain neutral if North Korea launches an attack that threatens the United States, sounding a warning for Pyongyang over its plans to fire missiles near the U.S. Pacific territory of Guam.

Asian equity markets sank again on Friday and European stocks looked set for their worst week this year because of the tensions.

"This situation is beginning to develop into this generation's Cuban Missile crisis moment," ING's chief Asia economist, Robert Carnell, said in a research note. "While the U.S. president insists on ramping up the war of words, there is a decreasing chance of any diplomatic solution."

China, North Korea's most important ally and trading partner, has reiterated calls for calm. Beijing has expressed frustration with both Pyongyang's repeated nuclear and missile tests and with behaviour from South Korea and the United States, such as military drills, that it sees as increasing tensions.

"China should also make clear that if North Korea launches missiles that threaten U.S. soil first and the U.S. retaliates, China will stay neutral," the Global Times, which is widely read but does not represent government policy, said in an editorial.

"If the U.S. and South Korea carry out strikes and try to overthrow the North Korean regime and change the political pattern of the Korean Peninsula, China will prevent them from doing so," it said.

China's Foreign Ministry repeated a call for all parties to speak and act cautiously and do more to ease the situation, rather than going down the "old path" of exchanges of shows of force and continually rising tension.

North Korea's state-run KCNA news agency said on Thursday its army would complete plans in mid-August to fire four intermediate-range missiles over Japan to land near Guam.

Trump said Kim was not going to get away with his "horrific" comments and disrespecting America.