Coming on the heels of the US-China trade war, US President Donald Trump's threats against Mexico have intensified fears for the global economy, hurting oil prices and lowering overall growth forecasts.
Asian stocks and oil markets made modest gains Thursday as trade tensions continued to weigh on investors' minds, with some cautiously hoping that the United States and Mexico will strike a compromise on tariffs.
US President Donald Trump said some progress -- but not enough -- had been made in Wednesday's talks with Mexico on averting the tariffs he intends to impose next week unless the flow of undocumented migrants into the US is stopped.
Trump tweeted that discussions would resume Thursday.
Coming on the heels of the US-China trade war, Trump's threats against Mexico have intensified fears for the global economy, hurting oil prices and lowering overall growth forecasts.
A World Bank report released Tuesday showed reduced global growth forecasts for the year, with the economy expected to expand by 2.6 percent, well below the three percent growth seen in 2018.
'Oil prices remain under pressure'
The decline in crude prices followed the release of data from the US Department of Energy that showed domestic production rising, while Morgan Stanley on Wednesday slashed its oil price forecast, citing a "sharper-than-expected slowdown in demand".
"Oil prices remain under pressure, dragged down by an unexpected gain in US inventories and comments from the head of Russian state oil producer Rosneft questioning the point of a deal with OPEC to withhold supplies," said Dean Popplewell, Vice President of Market Analysis at OANDA.
Oil made a tepid recovery Thursday, however, with OANDA senior market analyst Edward Moya saying that "we could see strong bullish momentum return if we see a softer US dollar, trade progress from the G20 Summit, prompting the alleviation of demand fears, geopolitical risks will keep supplies tight and rising summer demand."
Hong Kong inched up 0.2 percent while Tokyo rose 0.3 percent. Seoul eked out gains of 0.1 percent but Singapore was flat and Shanghai lost 0.5 percent.
Eyes on central banks
There are hopes that Trump and Chinese President Xi Jinping will meet at the G20 summit in Japan this month to jump-start stalled tariff negotiations.
Investors are also looking ahead to Thursday's gathering of the European Central Bank, hoping for fresh measures to tackle rising worries about growth and inflation in the eurozone.
Dovish comments by Fed Chairman Jerome Powell on Tuesday acknowledging trade tensions and signalling that the central bank was willing to act if necessary helped investors overlook a weak report on US private-sector hiring.