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Relief over potential aversion of U.S. government shutdown

boosts stocks

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Anxiety over escalating trade war weighs on markets

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Dollar recovers some losses, eyes on next week's Fed

meeting

By Rae Wee

SINGAPORE, March 14 (Reuters) - Asia shares rose on

Friday and global markets attempted a rebound after a brutal

selloff, while gold reached a record as an escalation of global

trade tensions left investors nervous and sparked a flight to

safe-haven assets.

Relief over the likely aversion of a U.S. government shutdown

boosted stocks in early Asian trade, after Senate Democrat Chuck

Schumer said he would vote to advance a Republican stopgap

funding bill, signalling that his party would provide the

necessary support.

U.S. stock futures rose sharply in response, with the Nasdaq

up 0.87% and S&P 500 futures advancing 0.7%.

EUROSTOXX 50 futures similarly edged up 0.04% and

FTSE futures gained 0.1%.

"For today, at least, this news from Congress is positive

for market sentiment at this point," said Alvin Tan, head of

Asia FX strategy at RBC Capital Markets.

MSCI's broadest index of Asia-Pacific shares outside Japan

traded 0.2% higher, though was on track to lose

more than 2% for the week, as global trade disputes battered

global stocks.

In the latest in a long list of tariff threats, U.S. President

Donald Trump said on Thursday he would hit imports of European

wine and spirits with duties of 200% if the EU did not remove

retaliatory surcharges on American whiskey and other products

that come into effect next month.

"Trump is making it very clear that if anyone were to

retaliate, his counter-escalation is going to be even sharper,"

said Vishnu Varathan, head of macro research for Asia ex-Japan

at Mizuho.

The latest developments sparked Thursday's steep selloff on Wall

Street and the confirmation that the S&P 500 was in a

correction, just a week after the Nasdaq confirmed the

same.

"I think Trump 2.0 is nothing like Trump 1.0. This time, the

president seems prepared to let U.S. markets and the economy

suffer while he implements his 'America first' goals," said

Michael Strobaek, global chief investment officer at Lombard

Odier.

Typical safe haven assets like gold have meanwhile been

beneficiaries of the escalating trade war, as the yellow metal

reached a record high of $2,990.09 an ounce on Friday. It

was on track to gain 2.6% for the week.

Elsewhere, Japan's Nikkei reversed early losses to

rise 0.12%.

Hong Kong's Hang Seng Index similarly gained 1%, but

was headed for a 2.3% weekly decline. China's CSI300 blue-chip

index advanced 1.4% and was set to rise 0.6% for the

week.

DOLLAR TROUBLE

The dollar regained some lost ground on Friday thanks to safe

haven flows, but was not too far off recent lows as worries of

an impending U.S. recession kept pressure on the greenback.

The euro last traded 0.1% lower at $1.0841, while

sterling fell 0.05% to $1.2944.

The euro has drawn additional support from Germany's fiscal

reset plan involving a 500 billion euro fund for infrastructure

and sweeping changes to borrowing rules to revive growth and

ramp up military spending in Europe's largest economy.

Germany's outgoing lower house of parliament will vote on the

measures on March 18 before the formation of a new parliament on

March 25.

Next week will also see a slew of central bank meetings

including the U.S. Federal Reserve, as investors await further

guidance on the rate outlook amid uncertainty over Trump's trade

policies and their impact on U.S. growth and inflation.

"Our assessment is the direction of travel is consistent,

rates will go lower. It's just a question of timing, when they

get to do it," said Mizuho's Varathan.

"I think eventually, the tariffs will be an inconvenience,

not an impediment to the Fed cuts, because even if the prices go

up... it is a negative demand shock and people are worse off,

not better off."

The dollar was last up 0.3% against the yen at 148.25,

though was set for a slight weekly loss against the Japanese

currency as bets for more Bank of Japan (BOJ) rate hikes ramp

up. The BOJ also meets next week.

In commodities, oil prices were higher after falling in the

previous session.

Brent futures rose 0.54% to $70.26 a barrel. U.S.

West Texas Intermediate crude futures tacked on 0.6% to

$66.96 per barrel.