The Labor Department also said unit labor costs rose by 0.6% in the second quarter following an upwardly revised 5.4% spike in the first quarter.
"The slight bias to the upside (in stocks) is a result of the CPI number".
"Geopolitics splashed cold water on the markets", said JJ Kinahan, chief strategist at TD Ameritrade.
Reuters data show a 22 per cent perceived chance for a rate increase after the Fed's December meeting.
Amid the hot rhetoric, US stocks sold off sharply on Thursday, with the S&P 500 falling more than 1 percent.
Trump 'to call for China IP trade probe tomorrow'
Still, Trump praised China Friday for supporting the recent United Nations vote to ratchet up sanctions against North Korea . The announcement followed a call Friday night between Donald Trump and Chinese President Xi Jinping.
"There was some skittishness earlier but then some buyers stepped in", he said. "I don't know how you deal with North Korea".
The Stoxx Europe 600 was down 1% in afternoon trade, while futures signaled the S&P 500 would open down 0.2% and the Dow Jones Industrial Average would open 0.1% lower.
Valeant Pharmaceuticals International, Inc. lost 1.58 Canadian dollars (1.24 USA dollars), or 9.4 percent, to 17.89 Canadian dollars (14.09 dollars), after the company said its subsidiaries in Australia were the subject of a tax audit.
In Asia, benchmarks in Hong Kong and South Korea - which had been one of the best performers of 2017 - closed down 2% and 1.7% respectively, Friday, putting the week's drop at 2.5% and 3.2%.
United States markets fell on Wednesday morning, spooked by rising tension between the USA and North Korea.
Japanese markets were closed for a holiday but the yen powered on, hitting an eight-week high of 108.91 yen to the dollar, adding to its biggest weekly gain since May.
IS suspect stabs Istanbul policeman while taken into custody
The police officer was taken to hospital with heavy injuries, while the suspect was shot dead by other police officers. The suspect was taken to Istanbul police headquarters, where police say he attacked an officer with a knife.
However, the S&P Bank sub-sector fell 0.7 percent on dimming prospects of another rate hike this year since higher rates tend to boost bank profits.
The dollar was further weighed down on Friday by the soft United States inflation data.
"Despite all this rhetoric, there is a general feeling that we are not going to go up to the war", said Karl Haeling, holding that this had provided little support to the market.
The Japanese yen last strengthened 0.03 per cent versus the greenback at 109.22 per dollar.
"It's a big move in the context of what we've seen in the course of this year, but in a bigger picture perspective the levels are still relatively moderate", said Harper. Inflation has risen 1.7% over the past 12 months, suggesting that inflation pressures remain well under control. The yield on the 10-year Treasury note slipped to 2.19 percent from 2.20 percent late Thursday.
Gold, another classic safe haven asset, was trading at around $1,285 per ounce, up more than two per cent this week and near a nine-week high. Major U.S. indices had posted record highs in recent weeks.
Commonwealth Bank CEO Ian Narev to depart
Commonwealth bank said the breaches were due to a coding error, which meant the machines failed to automatically report the transactions.
Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in U.S. crude inventories, leaving prices volatile.