Asia report: Markets drop as hopes for trade peace dwindle

Asian markets suffered on Friday after US President Donald Trump appeared to confirm that he will not meet Chinese President Xi Jinping to discuss trade before the end of a 90-day tariffs truce between the two nations.

The President merely shook his head when asked by reporters if he would meet the Chinese leader before the 2 March deadline, in what is a major blow to those still hoping for a swift resolution, though US Treasury Secretary Stephen Mnuchin and trade representative Robert Lighthizer remain set to lead a delegation to Beijing next week for the next round of trade talks.

US tariffs on Chinese goods are set to increase to 25% from 10% if no resolution can be agreed upon before the deadline.

Jasper Lawler, head of research at London Capital Group, said: "Up to now the markets have been optimistic about a trade deal being reached, despite little solid evidence. Trump’s stance is now rattling investor nerves just weeks before the deadline. With US corporate earnings starting to dry up, traders' full focus will soon be back on trade developments. With no deal in sight this will have a negative bias on equity market flows."

Japan's Nikkei 225 dropped by 2.01% to 20,333.17 as investors were hit with a bout of nerves due to global economic uncertainty, while the yen was down 0.05% against the dollar at JPY109.87.

"With many of the corporate earnings out of the way, equities appeared ready for a correction after their recent highs," Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management, told Reuters. "Equities will face further hurdles next week, as Mnuchin and Lighthizer will be visiting China. Brexit talks are also in focus."

Notable fallers on the Japanese index included Nikon and Honda, which tumbled 11.67% and 2.51% respectively, though Sony jumped 4.10% on news of the electronics company's first JPY100bn ($911.2m) share buyback for 2.36% of its Tokyo-listed stock.

Hong Kong's Hang Seng index dropped by 0.16% at 27,946.32 as energy shares tanked on the index's reopening after the Lunar New Year celebrations that continue to keep markets closed in mainland China.

However, the Hang Seng recovered after having lost more than 1% halfway through the session as investors are confident that A-shares will open higher on Monday as Beijing is expected to continue its support for economic growth, according to Steven Leung, director of sales at UOB Kay Hian in Hong Kong.

South Korea's Kospi dropped by 1.20% to 2,177.05 as index bellwether Samsung dropped by 3.03%, though gaming firm Netmarble Corp saw its share rise nearly 9% on a report that it will team up with Chinese tech giant Tencent Holdings to bid for the company that controls South Korea's Nexon

Brent Crude was up by 0.36% at $61.82, while WTI dropped by 0.50% to $52.38.

The Australian S&P/ASX 200 dropped by 0.34% to 6,071.46 as energy stocks drive the index lower, with Santos STO dropping by 4.37%, Woodside Petroleum falling by 1.67% and Beach Energy down 9.67%.

Across the Tasman, New Zealand's S&P/NZX 50 was the lone riser, climbing 0.47% to 9,176.61 in the run up the corporate earnings season.

Among the risers pushing the index higher were Ryman Healthcare, which climbed by 3.9%, Auckland International Airport, which rose by 2.3%, and Infrastructure investor Infratil, which gained 2.1% to reach its highest close since undertaking a two-for-one share split in 2007.

Finally, the Australian dollar fell 0.24% against the greenback to AU$1.41, while New Zealand's dollar dropped by just 0.01% to NZ$1.48.