US Futures Slide As Kim Threatens South Korea With "Explosive Justice Far Beyond Imagination"

Having literally blown-up their diplomatic channel, North and South Korean officials (and state mouthpieces) are rattling sabres at one another is ever-escalating language tonight.

First, Yonhap reported that North Korea is preparing to redeploy troops to two inter-Korean business zones near the border and reinstall border guard posts removed under a tension reduction deal.

"Units of the regiment level and necessary firepower sub-units with defense mission will be deployed in the Mount Kumgang tourist area and the Kaesong Industrial Zone where the sovereignty of our Republic is exercised," a spokesperson of the General Staff said in a statement carried by the Korean Central News Agency.

The official said that "civil police posts" that had been pulled back from the Demilitarized Zone straddling the inter-Korean border under a military deal "will be set up again to strengthen the guard over the frontline" and open areas along the border to support leaflet-sending by its own people into the South.

That triggered a small drop in futures.

But, then Yonhap confirmed that South Korea's top nuclear envoy arrived in Washington on Wednesday for talks with U.S. officials. His visit was unannounced, leading to speculation that he may have been sent as a special envoy by the presidential office, Cheong Wa Dae, triggering another leg down in futures.

And finally, North Korea's official newspaper said that this week's demolition of an inter-Korean liaison office was just the beginning, warning there could be additional retaliatory steps against South Korea that could go "far beyond imagination."

 "It is just the beginning," the Rodong Sinmun, the organ of the North's ruling party, said of Tuesday's destruction of the liaison office.

"The explosive sound of justice that will continue to come out could go far beyond the imagination of those who make a noise about what could unfold."

"Our military's patience has run out," the paper added. "The military's announcement that it is mulling a detailed military action plan should be taken seriously."

Dow futures are down 350 points from the US cash market close...

If only The Fed could print up some 'peace'?