Asian stocks up against escalating trade tensions between the United States and China

TOKYO (Reuters) – Asian stocks recovered their initial losses and rose on Tuesday as China again tried to stabilize its stock markets, but the gains seemed fragile in the face of fears of a sharp escalation of the trade war between the United States and China.

Major US indices fell sharply Monday after a Bloomberg report that the United States is preparing to announce tariffs on all remaining Chinese imports by early December if next month's talks between Presidents Donald Trump and Xi Jinping faibliraient.

Trump had mentioned the possibility of such a move before, but had not indicated a timetable.

The broadest MSCI index of Asia-Pacific equities outside Japan entered and exited negative territory in morning trading and rose 0.2% in mid-day.

The index lost 12% this month and is on the brink of its biggest drop in October since 2008, during the global financial crisis.

China's mainland Shanghai Composite and the first-rate CSI 300 were also sluggish, recording a drop in trade before rising 0.7% and 1.0% respectively in mid-day.

China's securities regulator said it would encourage share buybacks as well as mergers and acquisitions of publicly traded companies, while improving market liquidity, as part of the latest attempt to to set a floor for the country's sluggish stock markets.

The Japanese Nikkei average also wiped out initial losses and gained 1.3%. Traders said investors were looking for bargains among depressed stocks.[.T]

"At this point, no one can say that the stock market is collapsing. The sentiment of global investors remains fragile, "said Yasuo Sakuma, chief investment officer at Libra Investments in Tokyo.

The CBOE Global Markets Volatility Index, known as Wall Street's "Fatigue Gauge", climbed to 27.86 points, its highest level since Oct. 11 and the second highest since the volatility shock. early February.

"The likelihood of global equities turning to a bear market is increasing," said Masanari Takada, multi-asset strategist at Nomura Securities.

"While some investors who are interested in fundamentals buy stocks down, there are others that continue to sell automatically in response to increased volatility. In times like this, buyers can easily be overwhelmed by negative titles on rates, etc. "

Adding to the nervousness, the Chinese yuan has continued to weaken, bringing it closer to a closely watched level of support.

In the onshore trade, the yuan slipped 0.1% to 6.9724 for a dollar, a low of more than 10 years, sparking speculation as to whether the central bank will tolerate a slippage beyond the key level from 7 to a dollar.

Large state-owned Chinese banks were seen trading yuan against futures dollars, but there was no immediate evidence of dollar sales in the spot market, the currency approaching a key support level, said three traders.

The dollar index versus a basket of six large peers rose slightly and was just below its 10-week high reached on Friday. The index has gained on the decline of the euro after the announcement by German Chancellor Angela Merkel not to represent herself at the head of her CDU party. [FRX/]

Merkel said she would not seek to be re-elected to the party presidency, heralding the end of a 13-year period during which she dominated European politics.

Oil prices were mixed after being quiet overnight when Russia announced that its output would remain high and worries over the global economy fueled worries about crude oil demand. . [O/R]

West Texas Intermediate futures contracts edged up 0.2% to $ 67.17 per barrel, while Brent futures edged down 0.2% to $ 77.12.