Asian Shares Down As Investors Seek Safe Havens Before Donald Trump-Xi Jinping Meet

Asian share markets were down in skittish early trade on Tuesday as investors held their breath ahead of a potentially tense meeting between US President Donald Trump and his Chinese counterpart Xi Jinping later this week. The dollar inched lower as investors sold stocks in Europe and on Wall Street overnight to seek shelter in safe havens as political uncertainty overshadowed positive US economic data and solid growth in global manufacturing.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 per cent in early trade.

Japan's Nikkei was down 0.4 per cent as investors sought out the safe-haven yen.

China, Hong Kong, Taiwan and India markets are closed for holidays.

"We head into Tuesday on a distinct risk-off vibe, although the moves in equities are probably best described as 'drift,' rather than a 'spike' lower," Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.

Overnight, US stock indices closed in the red after Mr Trump held out the possibility of using trade as a lever to secure Chinese cooperation against North Korea in an interview with the Financial Times on Sunday.

Last week, Mr Trump tweeted that the highly anticipated meeting, which is also expected to cover differences over China's strategic ambitions in the South China Sea, "will be a very difficult one".

That has kept investors on edge, knocking riskier assets and forcing investors into safe-havens such as the yen and gold.

European markets hit a 16-month high on Monday but failed to hold on to the gains as risk aversion returned. The pan-European STOXX 600 index closed down 0.5 per cent.

Manufacturers across Europe and much of Asia had solid growth in May, making for a strong quarter overall, but the rise of US protectionism are keeping both investors and companies wary.

The euro was steady early on Tuesday at $1.06725.

The dollar dropped 0.2 per cent to 110.665 yen in its third straight session of losses.

The dollar index, which tracks the greenback against a basket of six trade-weighted peers, fell 0.1 percent to 100.46, although it touched a two-and-a-half-week high earlier in the session after data showed US construction spending grew 0.8 per cent to $1.19 trillion - the highest since April 2006.

The 10-year US Treasury yield fell to 2.3247 in its third consecutive session of declines. It touched a five-week low of 2.321 overnight.

In commodities, crude was steady after overnight losses on a rebound in Libyan output that exacerbated concerns about a glut.

US crude inched up to $50.27 a barrel.

Gold prices hit a one-week high, benefiting from its status as a safe haven asset.

Spot gold was trading almost 0.3 per cent higher at $1,256.15.