Asian markets sank on Wednesday after Donald Trump failed to give investors enough reassurance over the progress of China trade talks, while Hong Kong tanked again as the city was hit my more violent protests.
In a much-anticipated speech on Tuesday, the president went into election mode, hailing a strong economy and saying a trade deal was close but also warning that he could ramp up tariffs if he did not get his way.
Global equities have been on a roll for weeks on optimism the economic superpowers will hammer out a mini deal as the first part of a wider agreement.
However, with a planned signing ceremony between Trump and Xi Jinping seemingly put back to December from this month, and scant news on developments of late, traders are becoming nervous.
"We're close. A significant phase one trade deal with China could happen, it could happen soon," Trump said at the Economic Club of New York.
But he then warned: "If we don't make a deal, we're going to substantially raise those tariffs". He added "that's going to be true for other countries that mistreat us too".
The remarks were seen as a big letdown for markets, which had hoped he would provide some updates on the trade talks, after being jolted by Trump's denial of China's claim last week that the two had a plan to remove some tariffs as negotiations progress.
- Hong Kong's night of rage -
"The president avoided commenting on whether a rollback in tariffs is part of a phase one deal, merely saying that he will only agree to what is beneficial for US businesses," said Stephen Innes at AxiTrader.
"At this point, the market may have to wait until the actual signing of a deal (or not) to get confirmation on tariff rollbacks. And while the markets are still in the demilitarised trade war zone, investors remain in tariff rollback limbo."
Tokyo ended the morning session 0.9 per cent lower, Shanghai and Sydney each fell 0.5 per cent, Seoul dropped one percent and Singapore was off 0.7 per cent. Wellington, Taipei, Manila and Jakarta were also well down.
Adding to the negative mood were renewed fears about unrest in Hong Kong after the city suffered a night of rage as months of protests enter a more violent phase.
Police on Tuesday warned that the rule of law in the territory was on "the brink of total collapse".
Businesses were braced for another day of chaos, with the transport system partially closed and businesses shuttering.
Hong Kong's Hang Seng Index plunged more than two percent in early trade, having dived a similar amount on Monday, with a small rebound Tuesday.
Property and real estate firms were among the biggest losers, with Swire Properties, Sino Land and Henderson Land shedding more than three per cent while New World Development crumbled more than four per cent.
On currency markets, the trade talks uncertainty weighed on the yuan, which was hovering around 7.02 per dollar, having dropped below the seven mark earlier this month for the first time since early August.
And the New Zealand dollar rallied more than one percent after the country's central bank held off cutting interest rates, confounding expectations, as it said it saw signs of life in the economy.