Asian markets slipped on Friday leaving global shares just short of an all-time peak as investors turned cautious, fearing a new US law backing Hong Kong protesters could torpedo efforts to end the US-China trade war.

MSCI All Country world index, which tracks shares in 49 countries, were up 0.08 per cent at 548.88, only 0.3 per cent away from all-time peak hit in January last year before the start of US-China trade war. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.9 per cent. Hong Kong led the losses, dropping 2 per cent. South Korean shares lost 1.2 per cent and Japan's Nikkei eased 0.1 per cent.

China's blue-chips gave up 0.9 per cent a day before the country reports manufacturing activity, which analysts polled by Reuters expect to have shrunk for seventh straight month in November. Asian markets were sold off due to uncertainty over how US markets will perceive the latest clash between Washington and Beijing over Hong Kong.

Traders on Wall Street will commence a half-day session on Friday following Thursday's Thanksgiving holiday. US S&P 500 mini futures were down 0.26 per cent. China warned the United States on Thursday it would take ”firm counter measures” in response to U.S. legislation backing anti-government protesters in Hong Kong.

Anthony Chan, chief Asia investment strategist at Union Bancaire Privşe in Hong Kong, said the market is still erring on the side of caution especially as the year-end approaches. “There is still downward pressure on earnings. That's why when there is (negative) geopolitical news, some funds might want to sell and lock in their performance,” he said.

But on the whole, investors are now betting that while the US legislation spoils the mood, ultimately it remained in the interest of both Washington and Beijing to move forward with talks to get a trade deal. “The working assumption for most investors is that this will not derail the trade talks, given China is suffering from an economic slowdown,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Sentiment in the region has enjoyed an additional boost from a strong share performance this week by Alibaba Group, Asia's largest firm by market capitalisation. Alibaba has risen as much as 16 per cent since their IPO in Hong Kong on Tuesday.

Currency markets

However, major currencies were kept in tight ranges amid a dearth of any other significant developments in Sino-US trade talks. Against the yen, the dollar traded at 109.46 yen, near its six-month peak of 109.61 set on Wednesday.

The euro stood at $1.1010, stuck in a tight range for the past week. The British pound traded at $1.2912, staying in its $1.28-1.30 range since mid-October. As trading in major currencies slumbers, their implied volatilities, key gauges of expected swings measured by their option prices, plumbed to new record lows this week.

Among emerging currencies, the Chilean peso's 3.5 per cent plunge this week to an all-time low, and brought its decline during November to 10% following protests over inequality that turned violent again this week. In response, the central bank said it will start a six-month programme of foreign currency sales from Monday in a bid to stabilise the peso, earmarking $20 billion for the programme.

Commodities markets

Oil prices were little changed on Friday but look set to have one of the best performances in recent months in November, with Brent futures up almost 6 per cent month-on-month, which would be the biggest gain since April. US crude futures were little changed at $58.06 per barrel. They have risen more than 7 per cent this month.

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