SHANGHAI, May 14 — Fresh volleys in the US-China tariff war pressured Asian shares today, but comments from US President Donald Trump that he expects trade negotiations to be successful eased some worries.

Chinese markets that were pummelled in early trade swung in and out of the red amid signs of state support, but ended the day lower.

Late yesterday, Trump said trade talks with China are “going to be very successful”. That helped lift US stock futures, which had been down, to be more than 0.4per cent up, though sentiment remained fragile.

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European shares were expected to take their lead from US futures. In early European trades, the pan-region Euro Stoxx 50 futures were up 0.3per cent at 3,296, German DAX futures were 0.07per cent higher at 11,890.5 and FTSE futures were up 0.14per cent at 7,140.

China yesterday announced it would impose higher tariffs on US$60 billion (RM250.1 billion) of US goods following Washington’s decision last week to hike its own levies on US$200 billion in Chinese imports.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.1per cent this afternoon. The index had earlier fallen as much as 1.25per cent to its lowest since January 30.

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Prakash Sakpal, Asia economist at ING in Singapore, said the current volatility showed how a “180-degree” turn in US rhetoric on trade negotiations had spooked markets.

“We don’t see any quick end to this state of the markets until we see some resolution, constructive dialogue and something very solid in terms of deals. But the hopes for that are a bit misplaced currently,” he said.

Broader Asian markets were dragged lower by sagging Chinese shares, with the MSCI China index dropping 1.8per cent. China’s blue-chip CSI300 index finished the day down 0.6per cent, with suspected state-backed buying of equities helping to stem further losses.

“Politicians may be willing to focus less on the market impact until things get more severe, making it doubtful there will be an early resolution to the current breakdown in negotiations simply based on market moves,” said Kerry Craig, global market strategist at J.P. Morgan Asset Management.

“Furthermore, as there isn’t a clear schedule for meetings between Chinese and US negotiators, markets are likely to be more volatile.”

Australian shares finished down 0.9per cent while Japan’s Nikkei stock index closed 0.6per cent lower after touching its lowest level since mid-February.

The US Trade Representative’s office yesterday said it planned to hold a public hearing next month on the possibility of imposing duties of up to 25per cent on a further US$300 billion worth of imports from China.

The tariff escalation has rattled global markets, even as Trump said he would meet with Chinese President Xi Jinping next month.

Yesterday, the Dow Jones Industrial Average fell 2.38per cent to 25,324.99, the S&P 500 lost 2.41per cent to 2,811.87 and the Nasdaq Composite dropped 3.41per cent to 7,647.02.

As investors flocked to safe-haven assets, US Treasury yields remained near six-week lows early today, though they moved higher following Trump’s comments. Benchmark 10-year Treasury notes last yielded 2.4086per cent compared with a US close of 2.405per cent yesterday.

The two-year yield, which rises with traders’ expectations of higher Fed fund rates, was at 2.1945per cent, up from a US close of 2.193per cent. But data from CME Group continued to show a more than 70per cent chance of the Fed cutting rates by the end of 2019.

Underscoring market concerns over the economic impact of the trade war, 10-year yields once again ticked below those on three-month Treasury bills. A sustained inversion of this part of the yield curve has preceded every US recession in the past 50 years.

Yesterday, some traders were concerned that China, the largest foreign US creditor, could dump Treasuries to counter the Trump administration’s hardening trade stance. But most analysts downplayed such a possibility.

“If China did start to (sell Treasuries) it will galvanise both sides of politics in the US against China and the Fed would be sent into the market to buy bonds,” Greg McKenna, strategist at McKenna Macro said in a note to clients.

“That would expand its balance sheet but it would allow it to neutralise China’s efforts to disturb US financial markets. So I doubt they’ll try to sell Treasuries.”

After earlier falling against the yen, the dollar strengthened 0.31per cent against the Japanese currency to 109.64 .

The single currency was up less than 0.1per cent on the day at US$1.229, while the dollar index, which tracks the greenback against a basket of six major rivals, was mostly unchanged at 97.311.

China’s offshore yuan hit a fresh 2019 low early in Asia today before rebounding. It was last trading at 6.9009 per dollar, up 0.17per cent on the day.

Its onshore counterpart strengthened slightly to 6.8767 per dollar after touching four-month lows yesterday, sparking speculation China’s central bank may be letting the currency weaken amid the intensifying trade war.

Oil prices edged higher, buoyed by Middle East tensions though gains were checked by trade war concerns. Saudi Arabia said two of its oil tankers were among those attacked off the coast of the United Arab Emirates, describing it as an attempt to undermine security of supply amid United States-Iran tensions.

US crude was 0.3per cent higher at US$61.23 per barrel while Brent crude gained 0.4per cent to US$70.49 per barrel.

Elsewhere, gold gave up gains after earlier rising amid broader market jitters. Spot gold edged lower to US$1,297.12 per ounce. Bitcoin gained 4per cent to US$8,120. — Reuters