Asian equities were mixed Tuesday as investors sat on their hands days before this week's crucial meeting between Donald Trump and Xi Jinping, while gold hit a fresh six-year high on a weaker dollar and the US-Iran crisis.
While the stand-off between Washington and Tehran is fuelling concerns of a conflict between the old foes, the main focus for investors is the tete-a-tete between the leaders of the world's two biggest economies in Osaka.
World markets have rallied since the US president last week flagged positive phone talks with Xi and said they would discuss their trade spat on the sidelines of the G20 summit.
On Tuesday Chinese state media said top-level negotiators for both sides had held discussions ahead of the meeting, and "exchanged opinions on economic and trade issues". The call took place "at the request of the US side" and they agreed to maintain contact, the Xinhua news agency said.
"The G20 will not get going until midweek, but the anticipation of a meeting between the leaders of China and the US is keeping markets guessing," said OANDA senior market analyst Alfonso Esparza.
"The prolonged trade war between the two largest economies has downgraded global growth as more barriers to trade means higher prices. Optimism remains high, but more details need to emerge before the market can fully price in how far apart the two sides really are from a deal."
In early trade Hong Kong and Shanghai each dropped 0.7 percent after a recent healthy run-up, while Tokyo finished the morning 0.2 percent lower. Taipei was also down.
However, Sydney and Singapore were both 0.1 percent higher while Seoul and Wellington added 0.2 percent apiece. Manila and Jakarta were also up.
- Bitcoin holds gains -
It is "a pretty good guess that we won’t see a whole lot of movement in front of the big upcoming meetings (G20 and OPEC)," Matt Maley, equity strategist at Miller Tabak & Co, said. "The results of those meetings should be quite important to the stock market’s next move."
Gold prices continue to rise -- sitting at highs not seen since September 2013 -- as investors seek out the safe haven to hedge against a possible US-Iran conflagration, while the softening dollar is also providing support.
The White House ramped up sanctions on Tehran, imposing strict measures against supreme leader Ayatollah Ali Khamenei and military top brass following the downing of a US drone.
The move raised tensions between the two, though NAB's Tapas Strickland said the measures "appear to be more gloss than substance given US sanctions are already very harsh".
Oil prices were unable to sustain the surge started last week by the drone incident, with both main contracts dipping Tuesday.
Iran and the US have said they do not want a war, with the US content with trying to cripple Iran economically.
Oil traders are also keenly awaiting a meeting of OPEC and other major producers this weekend, hoping for clarity on their output reduction programme, which has supported prices.
The greenback was down against most other currencies, weighed by expectations the Federal Reserve will cut interest rates as soon as July, while bitcoin held above $11,000 after breaking the marker for the first time in 16 months.
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: Down 0.2 percent at 21,241.28 (break)
Hong Kong - Hang Seng: DOWN 0.7 percent at 28,305.31
Shanghai - Composite: DOWN 0.7 percent at 2,986.46
Euro/dollar: UP at $1.1409 from $1.1395 at 2050 GMT
Pound/dollar: UP at $1.2750 from $1.2740
Dollar/yen: DOWN at 107.14 yen from 107.29 yen
Gold: UP at $1,426.02 per ounce from $1,407.41 per ounce
Bitcoin - UP at $11,077.45 from $10,925.27
West Texas Intermediate: DOWN 12 cents at $57.78 per barrel
Brent North Sea oil: DOWN eight cents at $64.78 per barrel
New York - Dow: UP less than 0.1 percent at 26,727.54 (close)
London - FTSE 100: UP 0.1 percent at 7,416.69 (close)
-- Bloomberg News contributed to this story --