Asia markets reverse gains as trade war fears persist

US President Donald Trump (L) shakes hand with China's President Xi Jinping. Photo AFP

Asian markets largely reversed early gains Friday from a bargain-hunting push as investors remained cautious over the intensifying US-China trade war.

Tokyo managed to hold on to its winnings as positive data helped drive the Nikkei up 0.4 percent after figures showed the world's third-biggest economy was growing faster than analysts had predicted.

The data showed Japan's gross domestic product grew 0.4 percent from the previous quarter on robust consumer demand, beating analysts' median forecast of 0.1 percent.

"The reading of the data itself was not a huge buying peg... but nonetheless it confirmed personal spending could pick up," said Makoto Sengoku, market analyst at the Tokai Tokyo Research Institute.

Shanghai shed 0.7 percent on news of the United States banning Huawei and other Chinese firms from government contracts, and weak economic data showing sluggish demand.

Hong Kong lost 0.7 percent as did Manila. Singapore and Bangkok were also down, but Sydney edged up 0.3 percent and Seoul climbed 0.9 percent.

European markets, which had advanced on bargain-hunting by investors after several days of losses, fell in early trade, with London down 0.3 percent. Frankfurt dropped 0.5 percent and Paris slid 0.4 percent.

Safe-haven assets such as bonds, gold, and the yen remained in demand, signaling that trade war fears were continuing to weigh on markets.

Interest rate cuts by central banks in India, Thailand and New Zealand this week underscored investor anxiety, with analysts saying markets believe further cuts are in the offing.

"The current market dynamics are such that the stabilization of risk assets will remain a function of improvement on the trade front or the Fed turning increasingly more dovish," said Stephen Innes at VM Markets.

"With a near term trade agreement little more (than) wishful thinking at this stage the markets will lean on the dovish Fed narrative again as a critical circuit breaker to diffuse the markets' stress overload from escalating trade and currency war tensions."

Equities were hammered Monday after Beijing allowed the yuan to slide sharply against the dollar following President Donald Trump's announcement of fresh tariffs on Chinese goods starting September 1.

But Beijing's push to stabilize the yuan helped to ease fears of a full-blown currency war on top of an escalating trade war.

That has done little to placate Trump, however, with Washington formally branding China a currency manipulator earlier in the week.

On Thursday, he appeared to call for a weaker US dollar to help American exporters -- a move that breaks with decades of US policy.

"As your President, one would think that I would be thrilled with our very strong dollar. I am not!" he said on Twitter.

"The Fed's high-interest rate level, in comparison to other countries, is keeping the dollar high, making it more difficult for our great manufacturers... to compete on a level playing field."

Tokyo - Nikkei 225: UP 0.4 percent at 20,684.82 (close)

Hong Kong - Hang Seng: DOWN 0.7 percent at 25,939.30 (close)

Shanghai - Composite: DOWN 0.7 percent at 2,774.75 (close)

London - FTSE 100: DOWN 0.3 percent at 7,261.61

Pound/dollar: DOWN at $1.2117 from $1.2138 around 2100 GMT

Euro/pound: UP at 92.25 pence from 92.12 pence

Euro/dollar: UP at $1.1187 from $1.1182

Dollar/yen: DOWN at 105.97 yen from 106.06 yen

Brent North Sea crude: UP nine cents at $57.47 per barrel

West Texas Intermediate: UP 10 cents at $52.64 per barrel

New York - Dow: UP 1.4 percent at 26,378.19 (close) 

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