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Asian traders cautious after hefty sell-off as Trump woes linger

Hong Kong - Asian traders headed into the weekend on a nervous note on Friday as a pick-up in US stocks and positive data were offset by worries about a crisis engulfing Donald Trump's presidency that could throw his economic agenda into doubt.

Markets in the region were rocked on Thursday by claims by recently fired FBI boss James Comey that the president pressed him to drop a probe into ex-national security advisor Michael Flynn's links to Moscow.

That came a day after it was reported Trump had divulged classified information to Russia's foreign minister, fanning further allegations about his own ties to the country's leaders.

The reports compounded a crisis at the White House that has led for calls for the tycoon to be impeached; fanning fears that his plans for tax cuts and ramped up infrastructure spending could be knocked off course.

Trump on Thursday slapped down the accusations against him and said he was the victim of the "greatest witch hunt" in American political history.

US dealers - who on Wednesday saw Wall Street suffer its heaviest losses since Trump's November election - were cheered by better-than-forecast jobs claims figures and manufacturing data, helping the three main indexes to post small gains.

But Asian investors remained circumspect, with Tokyo ending the morning session 0.2% lower, Hong Kong, Shanghai and Seoul each flat and Sydney losing 0.5%. Singapore was also flat.

Ric Spooner, a market strategist at CMC Markets, said: "While investors will be relieved that yesterday's selling looks unlikely to be repeated today, it's too early to assume yesterday was a one-day wonder.

"Markets have clearly decided that the US political situation has the potential to knock stock valuations off their relatively high perch."

The dollar also managed to claw back some losses, having tumbled to seven-month euro lows but while analysts said Trump's troubles were unlikely to throw the Federal Reserve off its course of raising interest rates next month the unit would continue to face headwinds.

"The US remains completely engulfed in the Trump Comey storyline, and the (dollar) will continue to be unalluring until further clarity is forthcoming on the special investigation," Stephen Innes, senior trader at OANDA, said in a note.

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