* North Korea rhetoric boosts safe haven assets
* U.S. stocks down slightly; world stock index flat
* Gold recovers from 4-week low
* Euro zone businesses report strong Q3 activity (Updates with early U.S. afternoon activity)
By Caroline Valetkevitch
NEW YORK, Sept 22 (Reuters) - U.S. Treasury and gold prices rose, while the Japanese yen strengthened on Friday as a fresh exchange of barbs between North Korea and the United States fuelled geopolitical jitters.
North Korea said it might test a hydrogen bomb over the Pacific Ocean, in response to U.S. President Donald Trump's threat on Tuesday to destroy the reclusive country. noise out of North Korea will keep today's trading defensive," said Peter Cardillo, chief market economist at First Standard Financial in New York. "While we don't expect a serious selloff, the geopolitical rhetoric could heat up."
The aversion to risk drove investors into assets considered safer during times of geopolitical turmoil, like the yen, bonds and gold.
Gold recovered from a four-week low. Spot gold XAU= added 0.3 percent to $1,295.08 an ounce.
The U.S. dollar had scaled a two-month peak of 112.71 against the yen on Thursday, boosted by the U.S. Federal Reserve signaling this week that it was still on track to raise interest rates by the end of the year, and after the Bank of Japan maintained its bond-buying pledge.
The Japanese yen strengthened 0.35 percent versus the greenback to 112.10 per dollar, while sterling GBP= was last trading at $1.3521, down 0.42 percent on the day.
"(The yen) had been significantly under pressure and it's not totally surprising to see a little bit of a rebound in the yen ahead of the weekend," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
Sterling slipped and Britain's main stock index climbed after Prime Minister Theresa May laid out plans for the country's exit from the European Union.
May called for Britain to stay in the EU's single market during a roughly two-year transition out of the EU. The FTSE 100 stock index .FTSE rose 0.6 percent.
TREASURIES UP
U.S. Treasury prices gained on concerns about conflict with North Korea. Benchmark 10-year notes US10YT=RR rose 6/32 in price to yield 2.2587 percent, from 2.278 percent late on Thursday. U.S. Treasury yield curve flattened overnight to its lowest levels since late 2007, before retracing in the U.S. session.
In U.S. stocks, uncertainty over the U.S. healthcare bill weighed on insurers. Dow Jones Industrial Average .DJI fell 47.66 points, or 0.21 percent, to 22,311.57, the S&P 500 .SPX lost 1.58 points, or 0.06 percent, to 2,499.02 and the Nasdaq Composite .IXIC dropped 4.73 points, or 0.07 percent, to 6,417.97.
MSCI's gauge of stocks across the globe .MIWD00000PUS was flat. The pan-European FTSEurofirst 300 index .FTEU3 rose 0.08 percent.
Helping to support the gains in Europe, euro zone businesses ended the third quarter with much stronger growth than predicted, adding to evidence of the region's newfound dynamism which has spurred strong inflows into European equities this year. prices were mixed as major producers may wait until January before deciding whether to extend their output curbs beyond the first quarter. crude CLcv1 fell 0.1 percent to $50.50 per barrel and Brent LCOcv1 was last at $56.27, up 0.32 percent on the day.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
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http://reut.rs/2jNkG1g World FX rates in 2017
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