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China anxiety hits Asia stocks as tariff deadline nears

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[SHANGHAI] Faltering Chinese markets dented Asian stocks in a choppy Friday morning, just hours before Washington is set to impose tariffs on Chinese imports that many investors fear might trigger a full-scale trade war in a blow to the global economy.

Around 0215 GMT, MSCI's broadest index of Asia-Pacific shares outside Japan was 0.3 per cent lower, pulling back from a modest early rise. The index has lost 8.8 per cent since June 7.

Seoul's Kospi index fell 0.2 per cent and shares in Taiwan were 0.4 per cent lower. Australian shares were up 0.4 per cent.

China's major indexes were choppy in early trade, with the blue-chip CSI300 index in and out of negative territory. It was last 0.2 per cent lower, while the Shanghai Composite index fell 0.3 per cent.

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Japan's Nikkei stock index was 0.7 per cent higher after closing at a three-month low on Thursday.

US and European shares had been boosted on Thursday by reassuring economic data from Germany, and as automakers' shares jumped, with German Chancellor Angela Merkel saying she would back lowering European Union tariffs on US car imports after Washington offered to scrap threatened tariffs on European cars.

That backdrop of easing tensions helped the Nikkei's broad rebound, with automaker Honda Motor Co jumping 2 per cent and Toyota Motor Corp rising 1.9 per cent.

But in early trade on Friday, the focus remained on US tariffs.

On Thursday, US President Donald Trump confirmed that the United States would begin collecting tariffs on US$34 billion worth of Chinese imports at 12.01am Washington time (0401 GMT) on Friday, and warned that subsequent rounds could see tariffs imposed on more than US$500 billion worth of goods.

"The risk that further escalation derails growth is keeping some investors cautious," ANZ analysts said in a note Friday.

The Sino-US trade dispute has roiled financial markets including stocks, currencies and the global trade of commodities from soybeans to coal over the past several weeks.

Newly released minutes from the US Federal Reserve's last policy meeting on June 12-13 showed policymakers discussed whether recession lurked around the corner, and expressed concerns global trade tensions could hit an economy that by most measures looked strong.

The yield on benchmark 10-year Treasury notes was at 2.8364 per cent, compared with a US close of 2.84 per cent.

The two-year yield, which rises with traders' expectations of higher Fed fund rates, was at 2.5527 per cent compared with a US close of 2.561 per cent.

Gold, which is sensitive to rising interest rates, was 0.2 per cent lower. Spot gold traded at US$1254.43 per ounce.

The dollar was up 0.1 per cent against the yen at 110.72.

The single currency was down a hair on the day at US$1.1682, while the dollar index, which tracks the greenback against a basket of six major rivals, was flat at 94.474.

After ticking slightly higher, oil prices fell after US government data showed an unexpected jump in crude oil stockpiles.

However, the market remains nervous on concerns over tariffs amid an increasingly tight oil market.

Tensions between the US and Iran continued to rise as the US Navy said it stood ready to ensure free navigation and the flow of commerce, after Iran's Revolutionary Guards threatened to block oil shipments through the Strait of Hormuz.

US crude fell 0.2 per cent at US$72.80 a barrel. Brent crude was 0.4 per cent lower at US$77.08 per barrel.

REUTERS