Asian markets fell on Tuesday as trade moves back into view with China and the US holding more high-level talks this week, while oil prices edged higher as tensions in the Middle East simmer.
A recent run-up in equities over the past week has also led to profit-taking with Hong Kong turning lower after six straight days of gains.
US markets rose again as Chinese Vice Premier Liu He -- President Xi Jinping's right-hand man on economic issues -- headed to Washington on Tuesday for a new round of talks aimed at heading off a trade war between the economic giants.
There are hopes the two sides can hammer out an agreement to end a spat that has seen both sides threaten tariffs on billions of dollars of goods.
Donald Trump's call to help get Chinese telecom equipment maker ZTE "back into business fast" soothed nerves, while Commerce Secretary Wilbur Ross said Monday he was exploring "alternative remedies" for the firm, which was in April banned from buying crucial US technology for seven years.
"China is reportedly close to removing tariffs on agricultural products in exchange for relief for ZTE," said Stephen Innes, head of Asia-Pacific trade at OANDA. "It helps explain why President Trump said he'd work with President Xi on this company."
The talks come as US officials try to reach agreements with Canada and Mexico on revising their three-way trade pact, while EU steel tariff exemptions are due to end on June 1.
- 'Hornet's nest' -Hong Kong was 0.8 percent lower after racking up gains of more than five percent over the previous six sessions, while Tokyo ended the morning slightly down.
Shanghai was marginally down, while Sydney and Singapore each shed 0.4 percent, Seoul gave up 0.6 percent and Taipei dipped 0.2 percent.
However, there were gains in Manila and Kuala Lumpur.
Concerns about the already tinderbox Middle East helped put upward pressure on oil prices, with deadly clashes in Gaza during the opening of the US embassy in Jerusalem coming less than a week after Trump ripped up the Iran nuclear deal.
"In general, the market is wholly focused on the hornet's nest in the Middle East that is an accident waiting to happen," Innes added.
Both main crude contracts are are at highs not seen since November 2014, with economic uncertainty in major producer Venezuela also playing a key role.
The increase in oil prices is helping fan inflation expectations in the United States, which has given fuel to talk that the Federal Reserve will lift interest rates three more times this year
While the dollar was flat against its main peers it was sharply up against most high-yielding currencies including the South Korean won, Mexican peso and Indonesian rupiah.
- Key figures around 0300 GMT - Tokyo - Nikkei 225: FLAT at 22,862.79 (break)
Hong Kong - Hang Seng: DOWN 0.8 percent at 31,292.54
Shanghai - Composite: FLAT at 3,173.77
Euro/dollar: UP at $1.1934 from $1.1931 at 2100 GMT
Pound/dollar: UP at $1.3565 from $1.3556
Dollar/yen: UP at 109.75 yen from 109.65 yen
Oil - West Texas Intermediate: UP 11 cents at $71.07
Oil - Brent North Sea: UP 15 cents at $78.38 per barrel
New York - Dow: UP 0.3 percent at 24,899.41 (close)
London - FTSE 100: DOWN 0.2 percent at 7,710.98 (close)
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