Il Nuovo Postiglione - Investors walk fine line as Trump tariffs temper rate hopes

The US president's claim that Washington was "very close to a deal" to extend a China truce provided some optimism, though that was tempered by his warning of fresh levies on pharmaceuticals and chips.

After a strong start to the week sparked by hopes that painful jobs data will force the US Federal Reserve to lower rates next month, another batch of figures added fuel to the fire.

A closely watched index of services activity showed it had barely grown in July as companies contend with weaker hiring conditions and rising prices.

The news came after Friday's jobs data revealed far fewer US jobs were created than expected in May, June and July.

"Market pricing has moved aggressively in favour of a September rate cut by the Federal Reserve, after a weak July jobs report and ugly revisions to May and June signalled the US labour market may finally be cracking under the pressure of tariffs," said Neil Wilson at Saxo Markets.

"The data pushed the US closer to stagflationary territory," he said.

"So far, the market has held up and looked beyond the tariff risks, but we may at last be seeing the hard data finally catch up with the soft survey data."

But while bets on a rate cut in September have soared, he remained unsure that such a move was a certainty.

Stocks fluctuated through the morning.

Tokyo, Shanghai, Sydney, Wellington, Manila and Jakarta rose but Hong Kong, Singapore, Seoul and Taipei were in the red.

Confidence remains thin as Trump's tariff threats linger, with several countries -- including India and Switzerland -- still to hammer out deals before his delayed deadline Thursday, and agreed levies with others begin to kick in.

In his latest salvo, Trump told CNBC he was looking at hitting pharmaceuticals with tolls that eventually reach 250 percent, while semiconductors were also in the firing line.

He has said he will also hammer India over its purchases of Russian oil.

Still, Trump did strike a positive note on China, which is in talks with US officials to continue a truce agreed in May that saw the world's two largest economies pare down their eye-watering triple-digit tariffs.

Regarding Chinese President Xi Jinping, Trump told CNBC's "Squawk Box" that "I'll end up having a meeting before the end of the year, most likely, if we make a deal.

"If we don't make a deal, I'm not going to have a meeting. I mean, you know, what's the purpose of meeting if we're not going to make a deal?

"But we're getting very close to a deal."

He added that his relationship with Xi was "very good" and that "I think we'll make a good deal. It's not imperative, but I think we're going to make a good deal".

- Key figures at around 0230 GMT -

Tokyo - Nikkei 225: UP 0.6 percent at 40,802.73 (break)

Hong Kong - Hang Seng Index: DOWN 0.2 percent at 24,844.94

Shanghai - Composite: UP 0.1 percent at 3,619.78

Euro/dollar: DOWN at $1.1570 from $1.1582 on Tuesday

Pound/dollar: UP at $1.3303 from $1.3294

Dollar/yen: UP at 147.61 yen from 147.55 yen

Euro/pound: DOWN at 86.97 pence from 87.01 pence

West Texas Intermediate: UP 0.5 percent at $65.46 per barrel

Brent North Sea Crude: UP 0.5 percent at $67.96 per barrel

New York - Dow: DOWN 0.1 percent at 44,111.74 (close)

London - FTSE 100: UP 0.2 percent at 9,142.73 (close)

Q.Bernardi--INP