Berliner Boersenzeitung - Markets turn lower as trade war rally fades

With Japan's trade deal with Washington out of the way for now, attention was also turning to European Union attempts to reach an agreement to pare Donald Trump's threatened tariffs before next Friday's deadline.

Equities have enjoyed a strong run-up for much of July on expectations governments will hammer out pacts, pushing some markets past or close to record highs.

However, while Wall Street hit new records Thursday -- S&P 500 chalked up its 10th in 19 sessions -- another round of strong jobs data suggested the Federal Reserve might have to wait longer than hoped to cut borrowing costs.

The 217,000 initial claims for unemployment benefits in the week to July 19 was the lowest since mid-April and suggested the labour market remains tight.

The figures followed forecast-topping non-farm payrolls in June and come as inflation shows signs of picking up as Trump's tariffs begin to bite.

Traders are now betting on 42 basis points of rate cuts by the end of the year, according to Bloomberg News. That's down from more than 50 previously.

Meanwhile, a manufacturing survey showed US business confidence deteriorated in July for the second successive month, with companies worried about tariffs and cuts to federal spending.

Trump continued to press Fed chief Jerome Powell to slash interest rates during a visit to its headquarters on Thursday, where they bickered over its renovation cost.

The president, who wants to oust Powell over his refusal to cut, took a fresh dig during the trip, telling reporters: "As good as we're doing, we'd do better if we had lower interest rates."

Trump's anger at the Fed and his calls for officials to lower rates has raised concerns about the independence of the central bank, which is expected to stand pat at its policy meeting next week.

"While unlikely to yield anything concrete, the optics of a president storming the temple of monetary orthodoxy is enough to put Powell watchers on edge," said SPI Asset Management's Stephen Innes.

"The risk isn't immediate policy change -- it's longer-term erosion of independence, and the signal that Powell may not be sitting as comfortably as markets assume."

Trade hopes remain elevated -- Brussels and Washington appear close to a deal that would halve Trump's threatened 30 percent levy, with a European Commission spokesman saying he believed an agreement was "within reach".

The bloc, however, is still forging ahead with contingency plans in case talks fail, with member states approving a 93 billion-euro ($109 billion) package of counter-tariffs.

With few positive catalysts to drive buying, Asian markets turned lower heading into the weekend.

Tokyo retreated after putting on around five percent in the previous two days, while Hong Kong was also off following five days of gains.

There were also losses in Shanghai, Sydney, Mumbai, Singapore and Manila. London, Paris and Frankfurt dropped in the morning.

Seoul, Bangkok, Jakarta and Wellington edged up.

The dollar extended gains against its peers as investors pared their rate forecasts.

- Key figures at around 0810 GMT -

Tokyo - Nikkei 225: DOWN 0.9 percent at 41,456.23 (close)

Hong Kong - Hang Seng Index: DOWN 1.1 percent at 25,388.35 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,593.66 (close)

London - FTSE 100: DOWN 0.4 percent at 9,103.42

Dollar/yen: UP at 147.40 yen from 146.94 yen on Thursday

Euro/dollar: DOWN at $1.1751 from $1.1756

Pound/dollar: DOWN at $1.3469 from $1.3507

Euro/pound: UP at 87.28 pence from 87.01 pence

West Texas Intermediate: UP 0.4 percent at $66.33 per barrel

Brent North Sea Crude: UP 0.5 percent at $69.53 per barrel

New York - Dow: DOWN 0.7 percent at 44,693.91 (close)

(G.Gruner--BBZ)