TOKYO (REUTERS) - Asian stocks fell on Thursday (Feb 28) as investors dialled back some of their recent optimism about a Sino-China trade deal while news that the US-North Korean summit in Hanoi was ending early rattled confidence late in the trading day.

The White House said on Thursday US President Donald Trump and North Korean leader Kim Jong Un did not reach an agreement at the end of two days of meetings but had constructive discussions on denuclearisation.

South Korea's KOSPI finished 1.7 per cent lower, extending earlier losses just before the market close after both leaders brought forward the schedule of their second day of summit talks in Vietnam by almost two hours.

Spread-betters expected European stocks to follow Asia's lead and open lower, with Britain's FTSE falling 0.3 per cent, Germany's DAX shedding 0.2 per cent and France's CAC losing 0.25 per cent.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.45 per cent, extending earlier declines.

"Prior hopes were not that high towards the summit producing concrete agreements, but most expected the two leaders to end the meeting with a handshake. So the markets are reacting to the headlines," said Mr Shusuke Yamada, chief Japan FX strategist at Bank Of America Merrill Lynch.

The White House declined to say whether there would be a "joint agreement signing ceremony" with the two leaders at the end of their talks, which it had earlier said was on the schedule.

The dollar held onto its gains from Wednesday, supported by higher bond yields.

The Shanghai Composite Index fell 0.7 per cent as more weak data weighed on sentiment.

Figures released on Thursday showed factory activity contracted for the third straight month in February as export orders fell to the lowest level since the global crisis.

That added to worries about the US-China trade war.

US Trade Representative Robert Lighthizer said on Wednesday it was too early to predict an outcome in talks between Washington and Beijing.

US issues with China are "too serious" to be resolved with promises from Beijing to purchase more US goods and any deal between the two countries must include a way to ensure commitments are met, he told US lawmakers.

"Lighthizer's comments trimmed a bit of the trade resolution hopes which had grown recently, and equities are exposed to some downward pressure," said Mr Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

"As for tensions between India and Pakistan, it is a concern. But it remains a regional topic for the moment and the overall market impact has been limited thus far."

The conflict between India and Pakistan heated up after both said on Wednesday that they shot down each other's fighter aircraft.

PULLING BACK

Global equities scaled a four-month high earlier this week helped by upbeat expectations towards US-China trade talks, before pulling back after Mr Lighthizer spoke.

"One suspects trade headlines will continue to throw around sentiment for a while yet. The issues are complex, the trade-offs real, and opinions divided," ANZ strategists said in a note.

In currency markets, the dollar index against a basket of six major currencies stood little changed at 96.110.

The index had edged up 0.1 per cent on Wednesday, pulling away from a three-week trough as Treasury yields rose ahead of the release of US fourth-quarter GDP data later on Thursday.

The dollar dipped 0.15 per cent to 110.815 yen. The yen often attracts demand in times of political tensions and market turmoil.

It showed little response to data showing Japan's factory output posted the biggest decline in a year in January.

The euro was a steady at $.1.1372 after slipping 0.15 per cent on Wednesday. The pound stood within distance of a near eight-month peak of $1.3351 reached the previous day.

Sterling has rallied this week as investors ramped up bets that a no-deal Brexit was less likely and that Britain's departure from the European Union would be delayed.

US crude oil futures slipped 0.2 per cent to US$56.84 per barrel, losing a bit of steam after surging 2.5 per cent on Wednesday.

Crude rallied after US inventories unexpectedly plummeted and as Saudi Arabia brushed aside comments from US President Donald Trump seeking to keep oil prices from climbing.