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Share markets in Asia edged higher early on Friday morning as investors clung on to hopes that a highly anticipated meeting between U.S. President Donald Trump and Chinese President Xi Jinping this weekend could lead to an easing of trade tensions.

Yet the gains were small and underscored uncertainty over whether the talks will produce definitive progress in ending the year-long trade war between the world’s two largest economies.

White House economic adviser Larry Kudlow said Thursday that Trump has agreed to no preconditions for the meeting, set to take place on Saturday at the G20 summit in Japan, and is maintaining his threat to impose new tariffs on Chinese goods.

Kudlow also dismissed a Wall Street Journal report that China was insisting on lifting sanctions on Chinese telecom equipment giant Huawei Technologies Co Ltd as part of a trade deal and that the Trump administration had tentatively agreed to delay new tariffs on Chinese goods.

In early trade, MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.02 per cent, following on from modest gains in global equity markets overnight. U.S. stock futures, the S&P 500 e-minis, were up 0.2 per cent.

But Australian shares lost 0.21 per cent, while Japan’s Nikkei stock index was 0.3 per cent lower.

“Central expectations for the G20 meeting between Trump and Xi are that negotiations will resume, additional U.S. tariffs will be delayed, China will buy more U.S. goods and talks over tech-trade will gain renewed focus,” analysts at ANZ said in a morning note.

“However, as the difficulty of resolving economic aspirations between the two countries is herculean, markets remain cautious.”

On Thursday, the S&P 500 rose 0.38 per cent and the Nasdaq Composite added 0.73 per cent. The Dow Jones Industrial Average eased 0.04 per cent, dragged down by losses in Boeing Co shares following a Reuters report that the U.S. Federal Aviation Administration identified a new safety risk in the planemaker’s grounded 737 MAX aircraft.

Rising equity market indicators were accompanied by a minor pull-back in fixed income, with the yield on benchmark 10-year Treasury notes rising to 2.0192 per cent, compared with a U.S. close of 2.005 per cent on Thursday.

The two-year yield was also up, at 1.7469 per cent, but remained near recent lows, reflecting near certainty that the Federal Reserve will cut benchmark interest rates in July.

U.S. yields had fallen on Thursday, driven lower by ebbing optimism over a Sino-U.S. trade deal.

The dollar was 0.07 per cent lower against the safe-haven yen at 107.70, and the euro edged up 0.03 per cent to buy US$1.1371.

The dollar index, which tracks the greenback against a basket of six major rivals, was virtually flat at 96.180.

In commodity markets, U.S. crude lost 0.03 per cent to US$59.41 a barrel and global benchmark Brent crude added 0.08 per cent to US$66.60 per barrel.

The uncertainty over global trade saw gold rebound after dipping below US$1,400 per ounce on Thursday. Spot gold was last traded at US$1,414.72 per ounce, up 0.38 per cent.