© Reuters. FILE PHOTO: An investor looks at an electronic board showing stock information at a brokerage house in Shanghai

By Tomo Uetake

SYDNEY (Reuters) – Asian shares staggered up from five-week lows on Tuesday but remained fragile after U.S. President Donald Trump’s latest threat to raise tariffs on Chinese goods shocked financial markets and fueled worries that trade talks may be derailed.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, erasing earlier losses. It tumbled 2 percent on Monday after Trump unexpectedly jacked up pressure on Beijing in the midst of trade negotiations.

Chinese shares rose after their worst drop in more than three years on Monday. The benchmark advanced 0.6 percent, while the blue-chip CSI 300 climbed 1.0 percent. Hong Kong’s was up 0.7 percent.

Japan’s shed 0.8 percent, taking a delayed hit as the country’s financial markets opened after a 10-day break to mark the ascension of a new emperor.

U.S. stock futures for the declined as much as 0.8 percent in Asian trading hours on Tuesday as top U.S. trade officials said China had backtracked on commitments in trade talks.

Trump tweeted on Sunday that he would raise tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent by the end of the week, and would “soon” target the remaining Chinese imports with tariffs.

Yasuo Sakuma, chief investment officer at Libra Investments in Tokyo said believed stocks have entered a new downtrend, as investors had growing doubts over whether the United States and China would cut a deal on trade any time soon.

“Investors had been too complacent since the beginning of this year. Now it’s time for ‘sell in May and go away,'” he said.

Still, some investors are holding out hope that the tariff threats are a negotiating tactic.

U.S. Trade Representative Robert Lighthizer said he expected top Chinese negotiator Vice Premier Liu He would lead a delegation coming from Beijing for talks in Washington on Thursday and Friday.

“Markets are still not sure (whether Trump will go ahead with the tariff hikes,) and far from a panicky situation. We have to see how the talks will unfold this week,” said Naoki Iwami, fixed income chief investment officer at Whiz Partners in Tokyo.

There was little movement in the currency market, with the euro trading virtually flat at $1.1204, having held in a tight range for the past four sessions, while the dollar was steady at 110.70 yen.

China’s yuan rebounded off four-month lows touched previous day, with the offshore unit gaining 0.2 percent to 6.7864 per dollar and the rising 0.2 percent to 6.7727 per dollar.

The Australian dollar rose 0.2 percent to $0.6999 though investors remained cautious ahead of an interest rate decision from the country’s central bank later in the day.

A slim majority of economists polled by Reuters expects the central bank to keep rates at a record low although calls for a rate cut have grown louder after disappointingly weak first-quarter inflation.

In the commodity market, oil prices were mixed as U.S. sanctions on oil exporters Iran and Venezuela kept markets on edge, while concerns that the escalating Sino-U.S. trade dispute could slow the global economy also kept crude somewhat in check.

U.S. West Texas Intermediate (WTI) crude futures were marginally up at $62.27 per barrel while futures inched 0.1 percent lower at $71.14.

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