Wall street tumbles, Asian stocks surge amid investors wait for tariffs hike

U.S. stock futures turned negative and Asian shares pared gains on Friday as global investors waited nervously to see if Washington would suspend its plan to raise tariffs on Chinese imports at midday.

The White House said the two sides would resume negotiations on Friday morning in Washington after concluding the first of two days of talks on Thursday to rescue a trade deal that is close to collapsing. There was no word yet from Washington on any change to plans announced made earlier this week to raise tariffs on $200 billion worth of Chinese goods to 25 per cent from 10 per cent at 12:01 a.m. (0401 GMT). Beijing has vowed to retaliate.

U.S. President Donald Trump said on Thursday he had received a "beautiful letter" from Chinese President Xi Jinping, stoking hopes of a deal. "Even though talks don't seem to be going that well, there's a glimmer of hope there... it would appear that the extension of the talks is a slight positive. But of course, they've been talking for a long time. So it's probably more of a mean reversion trade as opposed to letting's buy that dip."

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.8 per cent, led by gains in Chinese shares. Shanghai composite rose as much as 3.1 per cent before paring some of its gains and last stood up 2.2 per cent.

Japan's Nikkei rose 0.7 per cent, while e-mini futures for U.S. S&P500 were last down 0.15 per cent in volatile trade. Still, gains were driven by short-covering after heavy selling this week. On the week. the Shanghai index is still down 5.9 per cent, the Nikkei 3.2 per cent, and ex-Japan Asia MSCI 4.2 per cent.

"I'd say there's 50 per cent chance the tariffs will be raised as announced, which should lead to fresh selling in stocks later today," said Norihiro Fujito, chief investment in Mitsubishi UFJ Morgan Stanley Securities. Trump also said on Thursday he was taking steps to authorise new tariffs on $325 billion in Chinese imports.

Rising geopolitical tensions are not helping. North Korea fired what appeared to be two short-range missiles on Thursday in its second such test in less than a week and the United States said it had seized a North Korean cargo ship.

On Iran, Trump said he could not rule out a military confrontation after Tehran relaxed restrictions on its nuclear programme in response to U.S. sanctions imposed following Trump's withdrawal of the United States from the accord with a year ago. The 10-year U.S. Treasuries yield stood at 2.446 per cent near its lowest levels since late March.

In the currency market, the yen is favoured, with the dollar changing hands at 109.83 yen, having hit a three-month low of 109.47 on Thursday. The euro firmed slightly to $1.1226 while the Chinese yuan perked at 6.8453 per dollar having hit a four-month low of 6.8638 to the dollar the previous day.

MSCI's emerging market currency index also tumbled to a four-month low. Oil prices held firm after Trump's comments on Xi's letter raised hopes for a deal for now. Brent rose 0.5 per cent to $70.78 a barrel while U.S. West Texas Intermediate (WTI) crude gained 0.8 per cent to $62.16. 

(With inputs from agencies.)