By Andrew Galbraith
SHANGHAI (Reuters) - A broad gauge of Asian equities made a slight recovery on Friday from three-week lows hit the previous day, with gains limited by investors' uncertainty over chances of China and the United States striking a preliminary deal soon to end their trade war.
European shares were expected to rise as well. In early European trades, pan-region Euro Stoxx 50 futures were up 0.14% at 3,687, German DAX futures were up 0.15% at 13,178, and FTSE futures were up 0.35% at 7,255.
U.S. S&P 500 e-mini futures, were 0.16% higher at 3,109.
On Friday afternoon, MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2%.
Markets showed little reaction to President Xi Jinping's reiteration on Friday that China wants to work out an initial trade agreement with the United States and has been trying to avoid a trade war, but it is not afraid to retaliate when necessary.
The index had dropped as much as 1.4% on Thursday, taking it to its lowest level since Oct. 30, on worries that U.S. legislation on Hong Kong threatened to undermine trade talks between the world's two largest economies.
Those concerns linger, with U.S. President Donald Trump expected to sign into law two bills backing protesters in Hong Kong after the U.S. House of Representatives voted 417 to 1 for the "Hong Kong Human Rights and Democracy Act", which the Senate had passed unanimously a day earlier.
"If he's going to be forced to sign it, then it brings another (element) of uncertainty to this phase one trade deal, which then pushes back into next year," said Matt Simpson, senior market analyst at GAIN Capital in Singapore.
But Simpson said that in the absence of major news on trade, rangebound market moves are "quite reflective of the small headlines coming through".
Chinese blue-chip shares, which had opened higher, turned negative, and were last down 0.68%.
Australian shares gained 0.55% and Japan's Nikkei was up 0.46%.
Worries that a "phase one" trade deal between the United States and China might not occur until next year had weighed on investor sentiment on Wall Street overnight, pulling the S&P 500 down 0.16% to 3,103.54, the Dow Jones down 0.2% to 27,766.29 and the Nasdaq Composite 0.24% lower to 8,506.21.
The losses, though, were tempered by China saying it was willing to work with the United States to resolve core trade concerns, and a report in the Wall Street Journal that China has invited top U.S. trade negotiators for a new round of face-to-face talks in Beijing.
"It's fair to say that some signs of trade-headline fatigue are emerging in markets," analysts at ANZ said in a note.
U.S. Treasury yields were a shade higher.
The yield on benchmark 10-year Treasury notes was at 1.7774%, up from its U.S. close of 1.772% on Thursday. The policy-sensitive two-year yield was at 1.607% compared with a U.S. close of 1.605%.
In currency markets, the yen was barely stronger, with the dollar buying 108.62 . The euro was up 0.06% at $1.1066.
The dollar index, which tracks the greenback against a basket of six major rivals, was off 0.05% at 97.941.
Oil prices retreated after hitting two-month highs following a Reuters report that the Organization of Petroleum Exporting Countries and its allies are likely to extend existing output cuts until mid-2020.
U.S. West Texas Intermediate crude dipped 0.75% to $58.14 a barrel and global benchmark Brent crude was down 0.64% at $63.56 per barrel.
Spot gold added 0.11% to $1,465.78 per ounce. [GOL/]
(Reporting by Andrew Galbraith; Editing by Lincoln Feast and Simon Cameron-Moore)