HONG KONG: Asian investors remained on edge Friday as the curtain came down on another volatile week for markets with fears of a global trade war playing off against a positive economic outlook.
Investors have swung from optimism to pessimism since last week's controversial move by Donald Trump to throw up tariffs on imports of some metals, with the removal of his moderate secretary of state adding to the unease.
However, the president's agreement to meet Kim Jong Un to discuss North Korea's nuclear programme provided much-needed relief, while a positive jobs and wages report tempered worries interest rates would shoot up.
Attention now turns to the Federal Reserve's monetary policy meeting next week. A rate rise is expected but its statement and new bank boss Jerome Powell's comments will be pored over for clues about future hikes with speculation it could announce three more this year.
"It's shaping up to be arguably one of the most critical central bank policy events in some time as Jay Powell gets set to dictate the course of Fed policy for the remainder of 2018 and beyond," said Stephen Innes, head of Asia-Pacific trade at OANDA.
"Given the enormity of the risk event, traders are getting remarkably anxious awaiting hints on forward guidance, so we should expect interest rate uncertainty to intensify as we near the event horizon."
Wall Street's three main indexes ended mixed, with a drop in US jobless claims providing support, while top White House advisor Peter Navarro, a trade hawk looking to sooth trade war fears, told CNBC the administration planned to work with allies "to make things better for everybody".
However, he added that Trump would soon consider fresh measures against Beijing over its "theft" of US intellectual property.
- Stability concerns -
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On Friday, Tokyo ended 0.6 percent lower, while Hong Kong slipped 0.4 percent and Singapore eased 0.1 percent. Shanghai fell 0.7 percent, while Bangkok and Jakarta were also down.
But Sydney added 0.4 percent and Seoul gained 0.1 percent. Wellington, Taipei and Manila also rose.
Further uncertainty has been fanned by reports that Trump is planning to sack his National Security Advisor HR McMaster, just days after Secretary of State Rex Tillerson was ousted and not long since Trump's chief economic advisor Gary Cohn resigned.
The upheaval has led to concerns about instability in the White House and a shift to a more hardline approach to world affairs.
The dollar struggled to make inroads against the yen as investors continue to buy the Japanese unit as a hedge against volatility, but the euro is being weighed by a soft tone from the European Central Bank on its plans for monetary tightening.
Officials at the ECB "have made it clear the ECB still leans dovishly when it comes to that first move in interest rates after the end of (easing) in the next six to 12 months", said Greg McKenna, chief market strategist at AxiTrader.
- Key figures around 0710 GMT -
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Tokyo - Nikkei 225: DOWN 0.6 percent at 21,676.51 (close)
Hong Kong - Hang Seng: DOWN 0.4 percent at 31,412.16
Euro/dollar: UP at $1.2318 from $1.2300 at 2100 GMT
Pound/dollar: UP at $1.3948 from $1.3933
Dollar/yen: DOWN at 105.91 yen from 106.39 yen
Oil - West Texas Intermediate: FLAT at $61.19 per barrel
Oil - Brent North Sea: DOWN four cents at $65.08 per barrel
New York - Dow: UP 0.5 percent at 24,873.66 (close)
London - FTSE 100: UP 0.1 percent at 7,139.76 (close)
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