SHANGHAI (News Wires) - Asian shares gave up ground on Wednesday, with weak data in the region and fears of an imminent escalation in the tariff war between the United States and China pulling markets lower even as strong earnings out of the US provided some support. Conflicting signs over the state of US-China trade relations pulled markets in opposite directions. A Bloomberg report on Tuesday said that the United States and China were seeking to resume trade talks to defuse a battle over import tariffs. However, later reports that the US administration plans to propose tariffs of 25 per cent instead of the initially proposed 10 per cent on $200 billion of imported Chinese goods injected uncertainty back into financial markets. A source familiar with the plan said the announcement could come as early as Wednesday. Chinese shares, the offshore yuan and the Australian dollar all weakened. A source familiar with the Trump administration's tariff plans for China told Reuters that an announcement could come as early as Wednesday. "We maintain our view that negotiated settlement will be the most likely outcome. However, getting to this stage will still lead to marked volatility in the markets as this process will be protracted, with both sides digging their heels to present a better deal to respective constituents," Everbright Sun Hung Kai analysts said in a note. In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.1 per cent, erasing earlier gains, while Japan's Nikkei stock index gained 0.8 per cent. S&P E-mini futures were down less than 0.1 per cent at 2,815.75 after earlier edging higher. Spreadbetters in Europe pointed to more mixed trade in Europe, with London's FTSE set to open 12 points lower, Frankfurt's DAX 1 point higher and Paris' CAC down 8 points. The Taiwan weighted index rose 0.4 per cent, with tech shares getting a boost after Apple Inc. beat Wall Street expectations for its quarterly results thanks to robust sales of its top-of-the-line iPhone X. The company's shares rose 3.4 per cent to $196.80 in after-hours trade. But shares in mainland China dropped, erasing early gains, with trade war fears and a private survey of purchasing managers pointing to a cloudy economic outlook. The survey showed China's manufacturing sector grew at its slowest pace in eight months in July, dragged down by declining export orders. The Shanghai Composite index fell 0.8 per cent, while the blue-chip CSI300 index lost 1 per cent. Australia's manufacturing sector also showed slower activity in July, with the Commonwealth Bank/Markit purchasing managers index at its lowest level in nearly two years. Australian shares were flat, with some support coming from miners ahead of expected strong results from Rio Tinto later on Wednesday. Policy meetings at the US Federal Reserve on Wednesday and the Bank of England on Thursday also kept some investors on the sidelines. Although the US central bank is expected to hold rates unchanged, investors will be looking for any change in the tone of its policy statement. "Buying sentiment towards the dollar could receive a boost if the central bank strikes a hawkish tone," Lukman Otunuga, research analyst at FXTM, wrote in a note. The yield on benchmark 10-year Treasury notes was at 2.9766 per cent, compared with its US close of 2.964 per cent on Tuesday. The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 2.6776 per cent compared with a US close of 2.669 per cent. The dollar rose 0.1 per cent against the yen to 111.96, and gained 0.5 per cent to 6.8390 against China's offshore yuan on news of the Trump administration's tariff plans. The Australian dollar fell 0.3 per cent to $0.7406. The euro was down 0.1 per cent on the day at $1.1676. The dollar index, which tracks the greenback against a basket of six major rivals, gained 0.2 per cent to 94.663. Meanwhile, oil prices fell on industry data showing an unexpected rise in US crude stockpiles. The slump in crude prices comes after their largest monthly decline in two years in July.
