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Asian markets mostly rose on Tuesday, recovering from the previous day's pounding after Donald Trump said China-US trade talks would resume soon, though the president's sharp changes in tone are keeping investors on edge.
Regional equities tanked and the yuan plunged on Monday in response to news at the weekend that Washington would hike tariffs on more than half-a-trillion dollars of Chinese imports after Beijing unveiled levies on tens of billions of dollars of US goods.
Trump's call for American firms to pull out of China and comments about not needing the country added to the sense of dread that the trade war would deepen and run for some time.
However, investors who had run for the hills in the morning returned in later trade after he said in a G7 news conference in France that negotiations would resume very soon and Beijing had telephoned saying it wanted to strike a deal.
He later described the talks as "more meaningful than at any time", while China's top negotiator called for calm and said he opposed any escalation in the stand-off.
While the remarks were too late to fuel a meaningful recovery in Asia, stocks in Europe and the US rallied.
Tokyo ended up 1%, Shanghai put on more than one percent and Sydney rose 0.5%. Seoul, Singapore, Wellington, Taipei, Jakarta and Mumbai also posted healthy gains.
But Hong Kong fell 0.1% with investors still spooked by fresh violent protests in the city over the weekend.
The early momentum in regional markets died down owing to lingering uncertainty about the outlook for the trade talks. Safe-haven gold recovered morning losses while higher-yielding, riskier assets saw their initial advances pared.
The yuan also remained under pressure, hitting a new 11-year low against the dollar.
'In thrall to the president's comments'
"It is not clear in what context that (Beijing) phone call was made," said Stephen Innes at Valour Markets. "Indeed, a spokesperson for the Chinese foreign ministry indicated he was 'not aware of' the call."
"However, does it matter if the call happened? The fact that President Trump is striking a more conciliatory tone is what's essential for market sentiment... It's possible both sides needed to push the trade envelope to unbearable proportions, and maybe that's what was required all along for cooler heads to prevail."
While trading floors are broadly upbeat, analysts warned markets could flip at any time, driven by headlines from the White House.
Wall Street is "in thrall to the president's comments, with financial markets doing abrupt changes of direction on his words", OANDA senior market analyst Jeffrey Halley said.
"Being the source of so much of the global volatility in the financial markets, it is logical that his comments, flippant or otherwise, would have an outsized effect."
Oil prices rose slightly, having dipped the day before on a sliver of hope in US-Iran relations after Trump said he was prepared to meet Iranian counterpart Hassan Rouhani in the next few weeks after talks over Tehran's nuclear programme at the G7 summit.
Tensions between the two have helped support crude, offsetting worries about demand for the commodity caused by the trade row and slowing global growth.
In morning trade, London and Frankfurt each fell 0.4%, while Paris lost 0.5%.
