A TRADER sleeps on the trading floor as Asian markets fell sharply Tuesday on concerns over the widening US-China trade war. Trade war fears battered Asian stocks on Tuesday but equities recovered slightly into the close as traders snapped up bargains after heavy selling.

Markets across the region followed the US and Europe sharply lower at the opening bell on Tuesday amid reports the US was planning to ratchet up its ballooning trade war with China.

China was hardest hit, dropping close to two percent at the session low before rebounding later in the trading day.

The benchmark Shanghai Composite Index closed down 0.5 percent at 2,844.51 points.

Tokyo followed the same pattern, even ending up fractionally in the black on bargain-hunting late in the day, with the benchmark Nikkei 225 index gaining 0.02 percent or 3.85 points to 22,342.00.

This trend was repeated across the region, with early losses pared in Seoul, Hong Kong and Sydney.

However, Europe’s main stock markets rebounded somewhat, with London’s benchmark FTSE 100 index gaining 0.3 percent at the open, Frankfurt climbing 0.7 percent and Paris 0.5 percent.

Despite the slight bump back up, analysts warned that market sentiment remained fragile.

“The market is in a really bad state. It is in as dangerous a place as it was in 2015,” said Zhang Qi, an analyst with Haitong Securities in Shanghai, referring to the 2015 market swing that saw the Shanghai index plunging more than 40 percent within three months.

The early declines came amid reports Washington was readying a new phase in its economic confrontation with China.

President Donald Trump has threatened to strike back against China’s retaliation to the US tariffs that are due to take effect July 6.

Trade frictions topped market players’ concerns at the open in Asia, with heavy selling in Europe and the US continuing through to Asia after reports Trump was planning new curbs on Chinese investment.

Washington has already announced it will impose investment restrictions on Chinese companies by June 30, with the Wall Street Journal reporting that any firm that is 25 percent Chinese-held would face curbs.

The reports drove US stocks down two percent at the lowest point on Monday but they recovered some of their losses after senior White House economic adviser Peter Navarro sought to ease fears in a TV interview.

Treasury Secretary Steven Mnuchin also rebuffed the reports but the mixed messages left some traders bemused.

“Despite the rebound, there remains a considerable degree of scepticism,” said Stephen Innes, head of trading at OANDA, adding that investors were not sure whether the comments were “diplomatic doublespeak or a meaningful denial.”

“The abundance of mixed and no less confusing signals are causing massive consternation across all asset classes,” added the analyst.

In a concrete consequence of the tit-for-tat trade blows, US motorbike maker Harley-Davidson said late Monday it planned to shift some manufacturing overseas to avoid retaliatory European tariffs imposed last week.

This sparked a furious response from Trump who said he was “surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag,” adding that he had “fought hard for them”.