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Asia stocks drifted lower on Thursday, joining a global sell-off on concerns over Turkey's financial crisis, although they clawed back some ground on news that China and the United States would hold trade talks.
Equities across the region suffered steep losses at the opening bell, with Tokyo and Shanghai off by more than 1%, dragged down by a weak session on Wall Street as traders fretted over possible contagion from Turkey's currency crisis.
Japan's main Nikkei 225 index shed 1.20% in early trade and China's benchmark Shanghai Composite opened weaker by 1.17% after another day of volatile trading driven by Turkey.
But surprising news that the world's top two economies would hold talks in a bid to bury the trade hatchet dented investors' pessimism and even pushed some Asian markets into the green.
China's Vice Commerce Minister Wang Shouwen, the deputy representative on international trade negotiations, will meet senior US treasury official David Malpass at Washington's invitation, the ministry in Beijing said in a statement.
Traders saw a glimmer of hope of a detente in the ongoing trade battle that has seen the two sides hit each other with reciprocal tariffs on goods worth $34bn, with much more threatened.
Washington and Beijing plan to launch a new round of tariffs on $16bn worth of goods from each country on August 23.
"It is hard to tell how the talks will go but it's a positive signal that the two countries are looking for some compromise plan," said Makoto Sengoku, market analyst at Tokai Tokyo Research Institute.
"If they were determined to fight it out, they wouldn't meet."
After a see-saw session, the Nikkei 225 closed down 0.05% to end at 22 192.04 while the wider Topix index was down slightly more, losing 0.64%.
In the final hours of trade, Hong Kong was down 0.6% while Shanghai was 0.3% lower.
Despite the positive news of US-China talks, nervousness over the Turkish currency crisis lingered in the background and kept bulls on the back foot.
On Wednesday, Ankara hiked tariffs on imports of several US goods in retaliation to American sanctions, the latest step in a tit-for-tat spat between the two NATO allies that shows little sign of easing.
The crisis has sent the Turkish currency into free fall and sparked concerns that European banks and other emerging markets exposed to the unit could also suffer.
Nevertheless, the lira managed to claw back some ground after losing just under a quarter of its value on Friday and Monday, a loss that had prompted fears of a fully fledged economic crisis in the critical emerging economy.
At the end of the Tokyo session, the lira was trading around 5.82 to the dollar, gaining throughout the trading day and considerably stronger than at the start of the week when it dropped below the psychologically important seven mark.
