Most Asian markets up but traders on edge as tariffs are hiked

Shanghai led gains across most Asian and European markets Friday at the end of a torrid week for equities, with investors keeping a nervous eye on China-US trade talks after Washington more than doubled tariffs on USD 200 billion of imports.

Equities started the day on a high as dealers took heart from positive comments from Donald Trump on the prospects for a deal but the region turned negative as the threatened levies kicked in and China vowed to hit back, saying it "deeply" regretted the US move.

However, Shanghai and Hong Kong bounced back on hopes the economic superpowers will be able to reach a deal to avert a trade war that most observers warn could shatter global growth and batter markets.

The tariffs came in after the first day of high-stakes negotiations in Washington between Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

After a week in which trading floors have been a sea of red, regional equities were given a lift by Trump saying he had received a "beautiful letter" from China's Xi Jinping and that it was "possible" to get a deal.

Shanghai, which lost more than seven per cent from Monday to Thursday, ended up 3.1 per cent, while Hong Kong piled on one per cent in the afternoon.

Sydney and Singapore each added 0.3 per cent, while Seoul was up a similar amount as investors brushed off news that North Korea had tested a long-range weapon, which is likely to raise tensions after the breakdown of denuclearisation talks with the United States. Mumbai added 0.2 per cent.

But Tokyo finished down 0.3 per cent, while Wellington, Manila, Taipei, Jakarta and Bangkok also fell.

In early trade London rose 0.6 per cent, Paris gained 0.9 per cent and Frankfurt advanced more than one per cent.

"Given the deadline has now passed there is the possibility that tariffs could still be avoided given that US officials allowed for goods currently in transit to be exempt from the new tariff increases,"said Michael Hewson, chief market analyst at CMC Markets UK.

"Which means there is a potential window, albeit a limited one, for an agreement to be hammered out."
"If there is a breakdown and the tariffs go up, then we will see a risk-off tone in markets."