SHANGHAI (REUTERS) - Asian shares slipped on Thursday (July 23) as investors' worries over rising tensions between Washington and Beijing overcame hopes for more stimulus, after the United Sates ordered the closure of China's consulate in Houston amid accusations of spying.
China said the order was an "unprecedented escalation" by Washington, and a source said Beijing was considering shutting the US consulate in Wuhan in retaliation.
US President Donald Trump said that other consulate closures were "always possible".
After ticking higher earlier in the morning session, MSCI's broadest index of Asian shares ex-Japan was last down 0.3 per cent, weighed down by slumping Chinese stocks. The Shanghai benchmark dropped 1.5 per cent following four days of gains.
Australian shares were flat while Hong Kong's Hang Seng index inched up 0.1 per cent.
Singapore's Straits Times Index was up 0.3 per cent at 11:23am local time.
Nikkei futures shed 0.13 per cent to 22,755, with Japanese markets closed for a holiday.
Singapore's Straits Times Index was up 0.3 per cent at 11:23am local time.
S&P mini-futures slipped 0.08 per cent.
Further escalation of Sino-US tensions was increasingly likely, said Kay Van-Petersen, global macro strategist at Saxo Capital Markets in Singapore.
"The biggest near-term risk to me ... is Trump going further and breaking on the Phase One deal," he said.
But he said unprecedented stimulus measures to boost pandemic-battered economies would continue to provide structural support for riskier assets.
"The forces of liquidity are just unparalleled ... we're seeing what happened post the GFC, but we're seeing it on steroids," he said.
"It's rare that you see both monetary and fiscal policy turned on, and then when they are they only turn on for a little bit."
Hopes for another round of US stimulus and strong corporate earnings boosted Wall Street overnight even as Republicans and Democrats remain far apart on how much to spend on the next round of coronavirus relief.
The Dow Jones Industrial Average rose 0.62 per cent, the S&P 500 gained 0.57 per cent and the Nasdaq Composite added 0.24 per cent.
In commodity markets, spot gold fell 0.3 per cent to US$1,865.84 per ounce, but remained near a nine-year peak on Thursday, with prices up nearly 23 per cent on the year. Investors have flocked to the safe-haven metal as they seek shelter from a potential reversal in US equities.
Gold has been helped by a weak dollar, which remained in the doldrums near more than four-month lows on Thursday, easing 0.05 per cent to 94.965. The greenback was flat against the yen at 107.14 and against the euro at US$1.1568.
Oil was also little-changed, with US crude flat at US$41.90 a barrel and global benchmark Brent crude up one cent to US$44.30 per barrel.
