Asian shares were off to a cautious start on Monday as investors pinned their hopes on any signs of a thaw in Sino-US trade negotiations, while oil prices firmed on worries over heightened tensions between the US and Iran.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.16 per cent in early trade, while Japan's Nikkei ticked down 0.26 per cent.

Wall Street shares closed slightly lower on Friday after hitting a record high thanks to signals last week from the Federal Reserve that it would cut interest rates soon to bolster its economy from protracted trade conflicts.

The Chinese state-run Xinhua news agency said on Sunday China's President Xi Jinping will attend the G20 summit in Japan this week, giving the first official confirmation of his attendance at a gathering where he is expected to meet US President Donald Trump.

The news came after US Vice-President Mike Pence on Friday decided to call off a planned China speech, which also increased optimism on upcoming trade talks with Beijing. Pence had upset China with a fierce speech in October, in which he laid out a litany of complaints ranging from state surveillance to human-rights abuses.

“Event-driven players are buying back stocks as US and China at least appear to be talking to each other,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Still, there remain doubts on whether the two sides could come to any meaningful agreement as the tensions have extended beyond tariffs, particularly after Washington put Huawei , the world's biggest telecoms gear maker, on a blacklist that effectively bans US firms from doing business with the company.

The US Commerce Department said on Friday it was adding several Chinese companies and a government-owned institute involved in super computing with military applications to its national security “entity list” that bars them from buying US parts and components without government approval.

In China, the Global Times newspaper said FedEx Corp is likely to be added to Beijing's 'unreliable entities list'.

“Few investors would expect a dramatic progress when they are talking about entity lists, just days before a likely summit,” Fujito said, adding that markets could slip back on disappointment after the summit.

Oil prices rise

Oil prices held firm near three-week highs hit last week after the US and Iran came to the brink of war following Iran's shooting down of an unmanned US surveillance drone.

Brent crude futures rose 0.6 per cent to $65.58 per barrel, near Friday's three-week high of $65.76. US crude futures were up 0.75 per cent at $57.88 per barrel.

Tehran said the drone was spying over its territory, while Washington said it was downed over international airspace.

US President Donald Trump said on Sunday he was not seeking war with Tehran, after a senior Iranian military commander warned any conflict in the Gulf region could spread uncontrollably and threaten the lives of US troops.

Yet tensions remain high between long-time foes Iran and the US, with Washington due to announce “significant” sanctions on Iran on Monday.

Also potentially becoming a factor in the equation, Arab politicians and commentators greeted Trump's $50-billion West Asia economic vision with a mixture of derision and exasperation, although some in the Gulf called for it to be given a chance.

Gold firms on safe haven buying

The combination of heightened geopolitical worries and likely US interest rates cuts encouraged investors to seek the safety of gold. The precious metal stood at $1,406.2 per ounce, near Friday's six-year high of $1,411.2.

The euro rose to a three-month high of $1.1379 in early Monday trade. The dollar fetched 107.33 yen, having slipped to as low as 107.045 on Friday, the lowest level since its flash crash on January 3.

The Turkish lira strengthened about 0.75 per cent to 5.767 after Turkey's main opposition claimed a decisive victory on Sunday in Istanbul's re-run election, dealing one of the biggest blows to President Tayyip Erdogan.

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