SEOUL, South Korea (AP) - World stock markets were mixed Monday amid investor unease as South Korea went ahead with a military drill on a frontline island despite threats of North Korean retaliation.
Inter-Korean tensions, a longtime geopolitical risk in Asia, have spiked to dangerous levels since Pyongyang launched a deadly artillery barrage on the South Korean island of Yeonpyeong last month in response to military exercises by Seoul.
North Korea had warned the South of "catastrophe" if it went ahead with a new round of live-fire drills delayed by bad weather. Seoul finally launched the exercise, which lasted about 90 minutes, on the island Monday afternoon and there were no immediate signs of any North Korean response.
South Korea's benchmark Kospi index closed 0.3 percent lower to 2,020.28, nearly erasing earlier declines of as much as 1.5 percent. South Korea's currency, the won, edged marginally higher to 1,150.20 to the dollar. The country's financial markets often show resilience during times of tension with North Korea.
Still, the uncertainty was seen as a factor in dragging Asian markets lower.
"It's something that can go very bad," Jackson Wong, vice president at Tanrich Securities in Hong Kong, said of the Korean tensions.
South Korean technology stocks were mixed. LG Display Co., which has an LCD factory near the heavily fortified land border with North Korea, fell 2.6 percent. LG Electronics Inc. declined 0.9 percent. Market bellwether Samsung Electronics Co., however, managed a gain of 0.7 percent.
The military tensions hurt sentiment across the region.
Japan's Nikkei 225 index fell 0.9 percent to 10,216.41 and Hong Kong's Hang Seng index shed 0.3 percent to 22,639.08.
In early European trading, Britain's FTSE 100 rose 0.2 percent to 5,882.90. France's CAC-40 gained 0.7 percent to 3,894.13 and Germany's DAX was up 0.6 percent at 7,024.64.
U.S. stocks were set to open marginally higher.
Dow futures were up 10 points, or 0.1 percent, at 11,440, while broader Standard & Poor's 500 futures rose 0.9 point, or 0.1 percent, to 1,239.30.
Back in Asia, the Shanghai Composite index slid 1.4 percent to 2,853.92 amid the Korean worries.
"The tensions gave investors a reason to sell off stocks on profit-taking, though it would really affect the financial environment if hostilities broke out," said Liu Kan, an analyst at Guoyuan Securities in Shanghai.
Australia's S&P/ASX 200 shed 0.5 percent to 4,829.20. Benchmarks in Thailand, Singapore, Taiwan and New Zealand also retreated, while those in India and the Philippines rose.
Ongoing worries about Europe's debt problems weighed on exporter shares in Tokyo. Kyocera Corp. fell 1.2 percent, while Ricoh Co. declined 2 percent.
Toyota Motor Corp. was off 0.8 percent after the Nikkei financial daily reported that the world's biggest automaker could face a double-digit decline in Japan sales next year.
In New York Friday, stocks ended flat as investors shrugged off encouraging economic signs and a tax-cut package expected to lift economic growth. The Dow Jones industrial average fell 7.34 points, or 0.1 percent, to close at 11,491.91.
In currencies, the dollar fell to 83.82 yen from 83.96 yen late Friday. The euro fell to $1.3167 from $1.3186.
Benchmark crude for January delivery was up 6 cents at $88.08 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 34 cents to settle at $88.02 on Friday.
Associated Press researcher Ji Chen in Shanghai contributed to this report.