Hong Kong returned from the three-day Lunar New Year break and was immediately in the red (Anthony WALLACE)

Hong Kong (AFP) – Asian stocks fell sharply Friday following losses on Wall Street as fresh doubts emerged over the prospects for US-China trade talks and Europe’s growth outlook.

Hong Kong returned from the three-day Lunar New Year break and was immediately in the red, as investors reacted to negative signals from the US ahead of next week’s crunch trade negotiations in Beijing.

“Fear raised its ugly head in overnight market action,” said CMC Markets chief strategist Michael McCarthy.

“US investors cited concerns about seemingly stagnant trade negotiations between China and the US, despite a week long holiday in China.”

US President Donald Trump told reporters he did not expect to meet Chinese counterpart Xi Jinping before the March 1 deadline, when US duty rates on many Chinese goods are due to jump.

He previously said a deal to avert rate hikes may depend on him meeting Xi, amid speculation the pair could set aside time when Trump flies to Vietnam to meet North Korea’s Kim Jong Un late this month.

Top White House economist Larry Kudlow further doused expectations by saying Washington and Beijing are a “sizeable distance” apart in talks, adding that no date for a US-China leaders’ summit has been set.

Economists say imposition of the tariffs could further weaken the global economy.

In morning trade, Hong Kong fell 1.2 percent, while Tokyo shed 1.7.

Sydney lost 0.5 percent as Australia’s central bank downgraded its economic outlook.

Shanghai and Taipei remain closed for the week.

– ‘No breakthrough in sight’ –

Meanwhile, the European Commission slashed its eurozone growth forecast for this year on an unexpected slowdown in Germany, tensions over lacklustre growth in Italy, and French protests.

The commission, the EU’s executive arm, is now expecting growth of 1.3 percent in the eurozone this year, a significant cut from 1.9 percent predicted in November.

Gold and the safe-haven yen edged up on the sombre outlook.

The pound and euro slipped after EU President Donald Tusk warned there was “no breakthrough in sight” in Brexit talks, and the Bank of England cut its UK growth forecast. 

The Australian dollar also fell sharply as the central bank cut growth and inflation forecasts.

The US dollar strengthened against most currencies, as oil prices slipped.

– Key figures around 0230 GMT – 

Tokyo – Nikkei 225: DOWN 1.7 percent at 20,396.21

Hong Kong – Hang Seng: DOWN 1.2 percent at 27,646.31

Shanghai – Composite: Closed for a public holiday

Euro/dollar: DOWN at $1.1336 from $1.1342 at 2150 GMT

Dollar/yen: DOWN at 109.75 yen from 109.83 yen

Pound/dollar: DOWN at $1.2943 from $1.2948

Oil – West Texas Intermediate: DOWN 33 cents at $52.31 per barrel

Oil – Brent Crude: DOWN 25 cents at $61.38 per barrel

New York – Dow: DOWN 0.9 percent at 25,169.53 (close)

London – FTSE 100: DOWN 1.1 percent at 7,093.58 (close)

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