North and South Korea are holding a second day of talks in what is being seen as a positive sign in efforts to ease tensions that have brought the peninsula to the brink of armed conflict.

North and South Korea appeared headed toward another clash, as Seoul refused an ultimatum that it halt anti-Pyongyang propaganda broadcasts by this afternoon or face military action, and North Korea said its troops were on a war footing.

US President Barack Obama today warned North Korea it risks deepening its isolation in the international community if it proceeds with a planned long-range rocket launch.

North Korea warned the US and South Korea of possible deadly consequences in retaliation for what it called psychological warfare involving journalist tours to the South’s portion of the buffer zone between the rivals.

North Korea accepted truckloads of South Korean aid through their border today, and agreed to hold rare high-level military talks with the South aimed at easing tensions on the world’s most heavily armed frontier.

SOUTH KOREA exchanged machine gun fire with communist North Korea yesterday in a rare incident that could raise the diplomatic stakes just as Pyongyang appears set to return to talks on its nuclear ambitions.

North Korea today spurned President George Bush’s olive branch of dialogue, describing it as “pie in the sky” and possible aid if the communist state dismantles its nuclear weapons programmes.