Markets have been in flux this week since US President Donald Trump fanned the embers in his tariff row with Beijing on Friday, threatening 100 percent levies on Chinese goods in retaliation for its recent rare-earth export controls.

While he tempered his rhetoric days later, the outburst has led to tit-for-tat measures and warnings, raising concerns about the months-long truce between the superpowers that has provided some much-needed calm on trading floors.

Trump on Wednesday added to a sense of unease when he told reporters the countries were involved in a trade war.

"Well, you're in one now," he replied to a reporter who questioned whether they were on course for a sustained trade war if he did not reach an agreement with Chinese counterpart Xi Jinping.

"We have a 100 percent tariff. If we didn't have tariffs, we would be exposed as being a nothing," he added.

His comments came as his Treasury Secretary Scott Bessent appeared to take a more conciliatory tone, by proposing a longer pause in their tariffs as they look to resolve the rare earths row.

Since May, the two countries have suspended sky-high levies on each other for three months at a time as they work towards a full trade deal.

"Is it possible that we could go to a longer roll in return for a delay? Perhaps," Bessent said. "But all that is going to be negotiated in the coming weeks, before the leaders meet in (South) Korea" for the Asia-Pacific Economic Cooperation summit.

He earlier told CNBC that Trump still planned to meet Xi at the summit, despite concerns that the latest spat could affect that.

"Together, they're running the classic good cop, bad cop routine," said SPI Asset Management's Stephen Innes. "Trump's declaration that the US is 'in a trade war' with China... set the tone.

"Meanwhile, Bessent, the newly minted 'cop of calm', suggested a possible extension to the 90-day tariff truce if Beijing holds off on rare-earth restrictions.

"For a market addicted to ambiguity, that's the perfect cocktail -- one part anxiety, one part relief, stirred, not shaken."

After a broadly positive day on Wall Street, Asia rallied for a second successive day.

Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Wellington, Taipei and Manila were all well up as traders focused on the likelihood of more Fed rate cuts.

The central bank's closely watched "Beige Book" survey of US economic conditions pointed to a softer job market, echoing a string of recent weak data.

That provided extra ammunition for those eager for more rate cuts, including Trump.

The figures also come after Fed boss Jerome Powell this week warned that "the downside risks to employment appear to have risen".

Still, economists at Bank of America remain cautious.

"As last week illustrates, risks are not all gone," they wrote in a commentary. "In addition to the (now) obvious lack of a trade deal with China, uncertainties remain somewhat elevated for inflation (the impact of tariffs), growth (the weak job market) and the Trump administration policies (health care and drug pricing)."

Bets on US rate cuts, a weaker dollar and worries about the latest China-US flare-up, have helped push gold to daily records and on Thursday it hit a peak of $4,234.70.

India's rupee was also holding gains after its strongest rally since June, bouncing from near a record low, after the central bank stepped in.

"The Indian Rupee's significant rally... the largest since late June, was primarily driven by central bank intervention, a softer dollar index, and supportive factors like lower crude oil prices and renewed foreign fund inflows," Dilip Parmar, senior analyst at HDFC Securities, told AFP.

- Key figures at around 0230 GMT -

Tokyo - Nikkei 225: UP 0.9 percent at 48,088.07 (break)

Hong Kong - Hang Seng Index: UP 0.2 percent at 25,953.67

Shanghai - Composite: UP 0.1 percent at 3,914.85

Euro/dollar: UP $1.1670 from $1.1645 on Wednesday

Pound/dollar: UP at $1.3436 from $1.3400

Dollar/yen: DOWN at 150.54 yen from 151.24 yen

Euro/pound: DOWN at 86.85 percent from 86.90 pence

West Texas Intermediate: UP 0.8 percent at $58.71 per barrel

Brent North Sea Crude: UP 0.7 percent at $62.34 per barrel

New York - Dow: FLAT at 46,253.31 (close)

London - FTSE 100: DOWN 0.3 percent at 9,424.75 (close)

dan/mjw

BANK OF AMERICA

INDEX CORP.