Asian shares were heading for weekly losses on Friday as conflicting messages on the Sino-US trade war only added to worries for the global economy, while talk of aggressive central bank stimulus drove bond yields to fresh lows.
US President Donald Trump said on Thursday he believed China wanted to make a trade deal and that the dispute would be fairly short.
Beijing on Thursday vowed to counter the latest tariffs on $300 billion of Chinese goods but called on the United States to meet it halfway on a potential trade deal.
With no settlement in sight, investors chose discretion over valour. MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.17 percent, to be down 1.4 percent for the week.
Japan's Nikkei fell 0.5 percent, making a loss of 1.8 percent on the week, while commodity-exposed Australia was heading for a weekly drubbing of 2.7 percent.
E-Mini futures for the S&P 500 did rise 0.24 percent, but were still off 2.2 percent on the week so far. Overnight, the Dow rose 0.39 percent, while the S&P 500 0.25 percent and the Nasdaq dropped 0.09 percent.
The spectacular rally in bonds remained the main investor focus. Yields on 30-year paper hit an all-time low of 1.916 percent to be down 27 basis points for the week, the sharpest such decline since mid-2012.
That meant investors were willing to lend the government money for three decades for less than the overnight rate.
Such is the gloom that surprisingly strong US retail sales came and went with no impact on the bond rally.
Analysts have cautioned that the current bond market is a different beast than in the past and might not be sending a true signal on recession.
"The bond market may have got it wrong this time, but we would not dismiss the latest recession signals on grounds of distortions," said Simon MacAdam, global economist at Capital Economics.
"Rather, it is of some comfort for the world economy that unlike all previous US yield curve inversions, the Fed has already begun loosening monetary policy this time."
Indeed, futures imply a one-in-three chance the Federal Reserve will chop rates by 50 basis points at its September meeting, and see them reaching just 1 percent by the end of next year.
There were plenty of other signs the cavalry were coming. European Central Banker Olli Rehn on Thursday flagged the need for a significant easing package in September.
Markets are keyed for a cut in the deposit rate of at least 10 basis points and a resumption of bond buying, sending German 10-year bund yields to a record low of ‑0.71 percent.
"Notions that the package will include a revamped QE programme also saw a sharp rally in Italian, Spanish and Portuguese debt," said Tapas Strickland, a director of economics at National Australia Bank.
"If the ECB undertakes such substantive stimulus, it is unlikely to do so alone given the upward pressure it would put on the US dollar."
Mexico overnight became the latest country to surprise with a cut in rates, the first in five years.
Canada's yield curve inverted by the most in nearly two decades, piling pressure on the Bank of Canada to act.
All the talk of ECB easing knocked the euro back to $1.1108 and away from a top of $1.1230 early in the week. That helped lift the dollar index up to 98.164 and off the week's trough of 97.033.
The dollar could make little headway on the safe-haven yen, though, and faded to 106.08 yen.
The collapse in bond yields continued to make non-interest paying gold look relatively more attractive and the metal held firm at $1,524.90, just off a six-year peak.
Oil prices were trying to bounce after two days of sharp losses. Brent crude futures added 23 cents to $58.46, while US crude rose 33 cents to $54.80 a barrel.