Chief EU negotiator Michel Barnier said an extension to Britain’s exit deadline should be linked to ‘a new element or new political process’ (EMMANUEL DUNAND)

Hong Kong (AFP) – Asian markets mostly fell Wednesday with nervous investors keeping tabs on developments in the China-US trade talks and the Brexit saga, while awaiting the conclusion of a key Federal Reserve meeting.

A general optimism about the outlook for the tariffs negotiations has helped propel equities higher across the world this year — offsetting concerns about the outlook for the global economy — with both sides sounding broadly positive.

But dealers have been spooked by a report that some US officials are feeling some pushback from Beijing on a number of demands, including on the crucial issue of intellectual property.

The unnamed negotiators said the Chinese side was growing concerned at the lack of assurances that US duties would be removed, according to the Bloomberg story.

While the report also said the resistance was regarded by some as a normal part of talks, it highlighted their fragile nature, with fears already raised earlier this month by the delay of a flagged signing summit between Donald Trump and his Chinese counterpart Xi Jinping.

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will return to Beijing next week to resume talks.

In early trade Hong Kong dipped 0.6 percent after a four-day rally, while Shanghai slipped 0.2 percent though Tokyo recovered in the late morning to head into the break slightly higher.

Sydney fell 0.4 percent, Seoul tumbled 1.1 percent and Singapore was off 0.7 percent, while Wellington and Manila were also in the red.

– ‘Political, economic costs’ –

Adding to unease on trading floors is continued uncertainty surrounding Britain’s drawn-out departure from the European Union.

Prime Minister Theresa May is expected to ask the bloc for an extension of the March 29 deadline for leaving, having seen her exit proposals killed off by MPs.

However, EU top negotiator Michel Barnier said any delay would have “political and economic costs” for the bloc’s remaining 27 states.

“A long extension… should be linked to something new, a new element or new political process,” he told reporters, while reports said May could be considering another general election or even a second referendum.

Observers expect the exit date to be put back but there is a concern that it could be rejected, leaving Britain to crash out of the EU without a deal, which many warn could be devastating for the economy.

Despite the brewing crisis the pound continues to hold its own against the dollar, with a long extension considered positive for the unit.

The Fed’s March policy meeting concludes later in the day, with analysts predicting it will announce a slower pace of interest rate hikes — to one from the two previously tipped — as the economy shows signs of softening.

Bank boss Jerome Powell’s post meeting comments will be pored over for some forward guidance.

But OANDA senior market analyst Alfonso Esparza warned: “A more-dovish-than-expected (statement) could spook investors and see them headed for safe havens if growth expectations are low at the same time as uncertainty on Brexit and the US-China trade deal are on the rise.”

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 0.1 percent at 21,583.63 (break)

Hong Kong – Hang Seng: DOWN 0.6 percent at 29,299.92

Shanghai – Composite: DOWN 0.1 percent at 3,087.88

Pound/dollar: DOWN at $1.3260 from $1.3268 at 2100 GMT

Euro/pound: UP at 85.57 pence from 85.55 pence

Euro/dollar: DOWN at $1.1349 from $1.1351

Dollar/yen: UP at 111.60 yen from 111.40 yen 

Oil – West Texas Intermediate: DOWN 17 cents at $58.86 per barrel

Oil – Brent Crude: DOWN four cents at $67.57 per barrel

New York – DOW: DOWN 0.1 percent at 25,887.38 (close)

London – FTSE 100: UP 0.3 percent at 7,324.00 (close)

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