Asian shares pulled back on Friday as worries over renewed Sino-US trade tensions weighed on sentiment ahead of the release of June trade data from China, though expectations of a Federal Reserve rate cut later this month kept losses in check.
Those bets remained strong despite a rise in US consumer inflation in June, and helped to lift the S&P 500 index to a record closing on Thursday. S&P 500 e-mini futures were last up 0.21 percent at 3,010.25.
Federal Reserve Chairman Jerome Powell indicated on Thursday that a rate cut is likely at the Fed’s next meeting as businesses slow investment due to trade disputes and a global growth slowdown.
On Friday, MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.05 percent in early deals, with Australian shares dipping 0.16 percent and Japan's Nikkei stock index trimming 0.11 percent.
“Markets have enjoyed a bit of a calm spot in the US-China trade war saga since the announcement of a truce and restarting of trade talks at the G20 meeting. Unfortunately, headlines are once again beginning to emerge,” ANZ analysts wrote in a morning note.
US President Donald Trump said on Thursday that China was not living up to promises it made on buying agricultural products from American farmers.
“While this wasn’t a big market mover, it does serve as a reminder that things could flare up again,” the analysts said.
Later on Friday, China will release trade data for June, with analysts expecting exports to have fallen as weakening global demand and a sharp hike in US tariffs took a heavier toll on the world’s largest trading nation.
On Thursday, the S&P 500 gained 0.23 percent to end at a record closing high of 2,999.91 points and the Dow Jones Industrial Average also hit a record high close of 27,088.08 points, rising 0.85 percent on the day.
The Nasdaq Composite fell 0.08 percent.
US Treasury yields were higher following weak demand for a USD 16 billion 30-year bond auction on Thursday and after the US Labor Department said its consumer price index excluding food and energy rose 0.3 percent in June, its biggest increase since January 2018.
The poorly received auctions had pushed the 30-year yield as high as 2.672 percent on Thursday, according to Refinitiv data.
The yield on benchmark 10-year Treasury notes was last at 2.1361 percent, up from its US close of 2.12 percent on Thursday, while the 30-year yield touched 2.6512 percent, up from a close of 2.639 percent.
The two-year yield which rises with traders’ expectations of higher Fed fund rates, was at 1.8605 percent, up from a close of 1.852 percent.
“The CPI report will have no material impact on Fed guidance nor have a significant influence on the great Fed debate around 25 or 50,” said Stephen Innes, managing partner at Vanguard Markets Pte, referring to expectations of the size of a July rate cut.
“After all, the FOMC is unquestionably willing to let inflation run hotter after spending the better part of a decade trying to ignite those flames,” he said.
The dollar fell 0.09 percent against the yen to 108.38 while the euro edged 0.06 percent higher to buy USD 1.1259.
The dollar index which tracks the greenback against a basket of six major rivals, was flat at 97.044.
Oil prices picked themselves up after taking a tumble on Thursday, after the Organisation of the Petroleum Exporting Countries said it expected the world would need 29.27 million barrels per day (bpd) of crude oil from its members in 2020, 1.34 million bpd less than this year.
Global benchmark Brent crude gained 0.53 percent to USD 66.87 per barrel and US West Texas Intermediate (WTI) crude was up 0.61 percent to USD 60.57 a barrel.
Gold prices, dulled by the stronger-than-expected US consumer inflation data, regained some of their shine. Spot gold last traded up 0.28 percent at USD 1,407.56 per ounce.